From tax loss harvesting to hedging demand: Analyzing the reasons behind Bitcoin's rise in early 2026

Entering 2026, Bitcoin and mainstream cryptocurrencies have started the year strongly, with market sentiment clearly improving. Bitcoin’s price once approached $93,700, rising over 7% since early January, indicating a reflow of capital. Ethereum’s performance during the same period was equally impressive, with the price reaching around $3,224 and a year-to-date increase of nearly 9%. Among major altcoins, XRP performed the best, with a single-day increase of nearly 13% and a weekly gain of close to 29%. Solana and Dogecoin also recorded double-digit gains, further reinforcing the narrative of a “comprehensive market recovery.”

Analysis shows that the first major reason for this rally is the easing of “tax reduction sell-off” pressure. In late December 2025, especially in the US market, some investors sold cryptocurrencies at a loss to hedge against capital gains taxes, putting pressure on Bitcoin and mainstream tokens at year-end. As the new year began, this tax-loss harvesting effect gradually subsided, leading to a natural technical rebound in prices. Several institutions pointed out that asset reallocation at the start of the year often benefits highly volatile assets.

Secondly, risk-averse demand driven by macro risk events has also boosted Bitcoin prices. US military actions against Venezuela have triggered a reassessment of geopolitical uncertainties. In this context, Bitcoin and traditional safe-haven assets like gold have attracted attention, with some funds rotating out of riskier or already significantly risen assets into Bitcoin, viewed as a “digital hard asset.” This trend is especially evident in institutional trading and has strengthened Bitcoin’s narrative as a macro hedge.

The third supporting factor comes from the overall improvement in risk asset sentiment. US stocks have strengthened driven by tech stocks and artificial intelligence concepts, and historical data shows a strong correlation between Bitcoin and tech stocks. Discussions about slowing inflation and future rate cut expectations have also increased risk appetite for highly elastic assets. Additionally, market rumors about Venezuela’s energy supply and potential “shadow Bitcoin reserves,” though unconfirmed, have temporarily amplified bullish sentiment.

Overall, the strong performance of Bitcoin and mainstream tokens in early 2026 is not driven by a single factor but results from the combined effects of the fading of tax-related pressures, rising safe-haven demand, and a global increase in risk appetite. Short-term volatility may still increase, but structurally, the crypto market is entering a new phase of capital reallocation.