Global financial markets transitioned to growth on February 6. The previous day, deep selling led to the overselling of stocks, cryptocurrencies, and commodities. Bitcoin recovered to $70,000. American stock indices, gold, and silver also showed positive dynamics. The main factors were technical buying and a temporary decrease in macroeconomic concerns among investors.
The current rise is more due to the completion of an aggressive phase of borrowing reduction than to fundamental changes.
Technical levels and momentum for growth
The recovery began after the quotes of key assets held at important support levels. The S&P 500 index touched the 100-day moving average. This indicator is traditionally monitored by systematic traders. Reaching this level triggered automatic purchases by funds that are rebalancing risks after several sessions of active selling.
Bitcoin demonstrated a similar behavior pattern. After a short-term decline to $60,000, the asset began to rise rapidly. This occurred against the backdrop of a slowdown in forced liquidations and stabilization of funding rates. The absence of further pressure from margin positions allowed spot market buyers to stabilize the situation.
The previous wave of sell-offs led to a cleansing of the markets from excessive leverage. There was a significant skew towards long positions in the derivatives segment. This situation intensified the decline when breaking key levels. By February 6, the majority of such positions had been closed.
Consequently, the pressure from sellers has noticeably weakened. With a decrease in the number of margin call requirements, prices were able to rise even without new catalysts.
The chart shows how the volume of borrowed funds grew throughout January. Then there was a sharp reduction in early February. After this cleansing, forced sales ceased. This allowed the market to recover despite the lack of new positive news.
U.S. macroeconomic statistics also contributed to the stabilization of sentiments. The consumer confidence data released on February 6 exceeded forecasts and reached a six-month high. These indicators do not guarantee confident economic growth. However, they reduce the risk of an immediate deterioration.
The bond market reacted to the news with an increase in the probability of a Federal Reserve interest rate cut in the near future. This led to a loosening of financial conditions and supported risk assets.
Gold and silver have also regained their positions. This dynamic confirmed that the recent decline was caused by a liquidity shortage, not by investors abandoning defensive instruments. A weak dollar and the search for favorable prices to enter assets further supported the upward movement.
The recovery on February 6 is characterized as a technical bounce. It is due to the state of oversold conditions and a reduction in the volume of borrowed capital. Nevertheless, the current situation does not yet confirm a definitive reversal of the global trend.
Markets remain extremely sensitive to liquidity conditions and expectations regarding interest rates. Volatility is likely to persist. Investors need to account for risks in the context of a general tightening of the financial environment.
