The price of bitcoin rebounded on Tuesday, hitting more than $56,000, a day after the world’s largest cryptocurrency tumbled to a six-month low – representing the worst decline since 2021.

This week, bitcoin’s drop in valuation was catalyzed by several factors, including fears of a looming U.S. economic recession, ongoing tensions in the Middle East, and other macroeconomic variables.

Bitcoin’s “fear and greed” index is currently sitting at “extreme fear,” a rapid shift from a relatively calmer status of “neutral” a week ago. Market sentiments often shift rapidly in response to political and economic events, and investors’ worries about an ongoing bitcoin market crash have not quelled, the index shows.

However, many bitcoin investors use the “extreme fear” mark as a prime opportunity to buy more bitcoin – and even alternatives to the leading cryptocurrency, such as ethereum and Solana – given what they see as an undervaluation of the digital assets.

Either way, some market analysts are optimistic about bitcoin making a strong recovery. “Looking ahead, bitcoin may find support in the $49,500 to $55,000 range, with potential for recovery tied to upcoming rate cuts that could boost liquidity, and positive political news about crypto assets,” Gracy Chen, the CEO of the crypto exchange Bitget, told TheStreet Crypto.

“Overall, in August, crypto is likely to remain in the same ranges, with the risk of a further decrease in market capitalization if the geopolitical factor plays a role,” she added.

Furthermore, the recent influx of institutional investors into the bitcoin space is another trend keeping bitcoin on an upward trajectory, according to analysts. “ETFs help dampen volatility by bringing more investors into the market, providing additional liquidity for buying and selling the asset,” Ryan Rasmussen, head of research at Bitwise, told Decrypt.

“The increased presence of institutional investors provides more stable capital flows into the market, mitigating the harm caused by crashes,” Patrick Pan, chairman and executive director at OSL, told Decrypt.