Bitcoin Reclaims $71,000: Volatility as a Proxy for Global Risk Appetite

The Recovery: After a brutal selloff on Thursday that wiped out weeks of gains, Bitcoin (BTC) staged a “violent” recovery on Friday, surging 13% to reclaim the $71,469 level. The broader crypto market followed, with Ethereum and Solana gaining 9%.

The Leverage Flush

Data from CoinGlass reveals that the volatility was driven by a classic leverage washout:

• $2.1 Billion in bullish bets were liquidated in 24 hours.
• The flush was exacerbated by the forced liquidation of high-leverage options tied to the BlackRock IBIT ETF.
• MicroStrategy (MSTR), a key corporate holder, reported a $12.4 billion paper loss for Q4, adding to the panic before the rebound.

Why This Matters for Forex Traders

While many Forex professionals avoid direct crypto exposure, Bitcoin's current correlation with global liquidity makes it a critical leading indicator.

• Risk-On Signal: The rapid recovery in BTC aligns with the S&P 500's push to record highs, confirming that risk appetite remains voracious despite higher Treasury yields.
• Liquidity Gauge: The ability of the market to absorb billions in liquidations suggests ample liquidity in the financial system, effectively greenlighting carry trades in FX markets.

Technicals

• Implied Volatility: The Bitcoin Volmex Implied Volatility Index spiked from 57% to 97%, indicating that while the trend is up, the path remains treacherous.

Forex traders should use BTC price action as a barometer for “Risk-On/Risk-Off” sentiment in the coming week.