How sustainable is the crypto rebound? Needham sees further momentum

The recent recovery across digital assets could have further room to run, according to Needham & Company, which has increased its crypto trading volume forecasts for the exchanges and platforms covered by the firm.

"How sustainable is the crypto rebound? We believe it has legs," analyst John Todaro wrote in a note to clients, identifying three factors supporting the firm's assessment.

Investor capital could rotate back into crypto

The first factor is a potential rotation in investor attention and capital. Needham said artificial intelligence stocks, which previously attracted significant retail participation, have cooled as regulatory pressures increase ahead of the midterm elections.

Retail trading activity in commodities, including oil and metals, has also moderated.

Against that backdrop, Needham believes digital assets could become relatively more attractive to investors again as competing speculative trades lose some of their momentum.

Heavy bitcoin selling may already have taken place

The second factor centres on selling pressure. Needham believes a substantial amount of potential supply has already been absorbed by the market following ETF and retail investor outflows alongside reductions in holdings by public companies.