Just as we step into the first week of 2026, the crypto market has given us a nice "New Year’s gift."

As of January 2nd, the overall market rebound has been quite evident—Bitcoin rose about 1.3% to surpass $88,678, Ethereum followed with a roughly 2.8% increase to $3,020, but the real eye-catchers are the altcoins, with PEPE soaring over 21%, and DOGE jumping more than 8%. The total market capitalization also steadily increased, climbing 1.2% to reach $3.08 trillion.

So, how did this wave of rebound come about? Let’s break it down.

**January Effect + Tax Loss Reversal Strategy**
January is a "reflow window" for traditional funds. Many investors sold off assets in December last year to offset taxes, and as a new year begins, they naturally re-enter the market to replenish their positions. This creates a steady buying support.

**Improved Institutional Fund Flow Rhythm**
The flow of funds into ETFs has stabilized, and institutional actions have become more rational. Coupled with retail investors on-chain eager to "buy the dip" at low levels, the market can naturally hold up.

**On-Chain Sentiment Is Recovering**
Whales are quietly accumulating coins, and large outflows from exchanges have decreased significantly, indicating selling pressure is easing. More intuitively, the Fear & Greed Index has risen from "Extreme Fear" to 28, showing market sentiment is clearly warming.

**Healthy Deleveraging in the Derivatives Market**
Open interest in futures has fallen sharply, and liquidation amounts have plummeted 46% to $126 million. This means leveraged positions chasing high prices have decreased, making the market more stable and less likely to be knocked down by a single large red candle.