The total value of the crypto market has surged in recent weeks as bears start to buy back in and bulls 'hold on for dear life'

• The total value of the cryptocurrency market has been on the rise in recent weeks.
• The comeback is pegged to optimism after the Fed's rate hike, Bank of America said in a note. 
• However, a recession could lead to another sell-off in digital assets, BofA analysts warned.

The total value of the cryptocurrency market has surged in recent weeks, with Bank of America analysts stating that it may be a sign that bears are beginning to buy back in as bulls continue to "hold on for dear life".

The uptick comes as a brutal year for crypto investors drags on through the second half of 2022, with the market facing a steep sell-off that's wiped out $2 trillion from the digital asset market since bitcoin peaked at $69,000 last November. 

But investors scared away by the sell-off may be returning, BofA analysts said in a note Monday. The total market value of crypto rose 11% to $969 billion in the two weeks ending July 26, and the top five layer 1 tokens, which include bitcoin, ethereum, and Binance Coin were up by 17%, Bank of America noted. 

As of last week, the total value of the space was still down by 56% from the beginning of the year, and the top 5 tokens were down by 57%. But the recent change of pace signals optimism among investors is returning to the digital asset market. 

"Idiosyncratic crypto risks spurred by the digital asset correction over the last ninety days appear discounted and investors are moving off the sidelines as risk assets rally," the bank's analysts said in the note. 

Investors also appear to be encouraged by the possibility inflation may have peaked. After CPI data showed inflation hitting 9.1% in June, the central bank initiated another .75-point rate hike last week. The jumbo rate hikes in June and July have led to some to hope that the Fed's inflation fight will begin to show results starting with the upcoming CPI report on August 10. Some commentators also feel that the central bank may be able to pull off a "soft landing" for the economy, bucking predictions of a moderate economic downturn ahead. 

But Bank of America analysts are still wary, warning investors that the crypto market remains fragile: "Our view is that risks related to rising rates, inflation, and a mild recession are likely discounted, but a hard recession may result in another risk asset correction including crypto/digital assets," the note said.

Analysts added that the crypto market dipped by 20% twice since mid-May, demonstrating the sector's extreme volatility.