But Bitcoin’s rebound was limited by anticipation of key U.S. inflation data this week. Sustained capital outflows also showed sentiment towards crypto remained weak.
Bitcoin rose 3.4% to $56,715.3 by 01:1 ET (05:16 GMT).
Crypto markets were nursing steep losses from the past week, amid a broader decline in risk-driven markets as traders grew more concerned over an economic slowdown.
This selldown saw Bitcoin sink as low as $52,000, although the token managed to recover over the past two sessions.
Bargain buying played a major role in supporting Bitcoin, as recent capital flow data showed institutional investors turned largely averse towards crypto.
Crypto markets saw outflows totaling about $726 million in the past week- their biggest weekly outflow since March, data from digital assets manager CoinShares showed on Monday.
Traders were seen increasing short positions on Bitcoin, while altcoins were sold off across the board.
Fears of slowing economic growth and expectations of a smaller interest rate cut by the Federal Reserve drove these outflows, as did a broader risk-off move in global financial markets.
“The crypto market finds itself in an unusual state of suspended animation. Trading volumes and liquidity have taken a hit in recent weeks, coupled with persistent ETF outflows and the waning popularity of once-hot basis trades. It’s as if the entire sector is holding its breath, waiting for a catalyst,” Kristian Haralampiev, Structured Products Lead at Nexo told Investing.com.
Haralampiev noted that a divergence was emerging between speculation over Ether and Solana, with a bias towards Solana reflecting some market hedging for more gains in the token.
Crypto markets were awaiting the first presidential debate between Donald Trump and Kamala Harris, which is set to take place later on Tuesday.
Any signs of Trump gaining an edge in the presidential race are likely to boost crypto prices, given that the Republican candidate has maintained a largely pro-crypto stance in his campaigning efforts.
But a slew of polls released in late-August showed Harris held a slight lead over Trump, especially after her official nomination as the Democratic presidential nominee.
Broader cryptocurrency prices tracked a recovery in Bitcoin. World no.2 crypto Ether rose 2.1% to $2,344.98.
SOL, XRP, ADA and MATIC rose between 1% and 5%, while among meme tokens, DOGE added 7.7%.
Focus was squarely on upcoming U.S. consumer price index inflation data, due on Wednesday, for more cues on interest rates.
The reading comes just a week before a Federal Reserve meeting, where the central bank is widely expected to cut interest rates by 25 basis points.
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