Markets
Bitcoin Bottom Has Arrived, But Market News Still Poses a Threat: Bitfinex
Main conclusions
- Bitcoin prices dropped to a low of $53,219 on July 3 but showed signs of stabilizing over the weekend.
- Market data indicates a potential local bottom, with narrowing volatility spreads and negative funding rates.
Share this article
Bitcoin prices have recovered after falling below $53,219 on July 3, reaching a potential local bottom according to the latest edition of the “Bitfinex Alpha” report. The initial price decline was triggered by sell-off fears from the German government and Mt. Gox creditors.
Market sentiment has shifted as traders reassess the impact of the German government’s Bitcoin transfers to exchanges, recognizing them as a relatively small proportion of total Bitcoin transactions since 2023. Furthermore, volatility metrics indicate a narrowing of the spread between implied and historical volatility, suggesting greater market stability.
Notably, short-term holder behavior points to potential selling exhaustion, with the Spent Output Profit Ratio (SOPR) for this group at 0.97, indicating selling at a loss. Historically, such conditions have preceded price recoveries as selling pressure subsides.
Funding rates for Bitcoin perpetual contracts have turned negative for the first time since May 1, potentially signaling an oversold market. When combined with low short-term SOPR values, these conditions have often marked the end of price corrections in the past.
While long-term Bitcoin holders continue to take significant profits, market positioning demonstrates complacency among short sellers. This is evidenced by high numbers of short liquidations even during the July 7 market rally, suggesting a lack of clear directional conviction among traders.
However, recent data from the U.S. economy suggests that an interest rate cut is unlikely at the Fed’s next meeting, scheduled for July 31. This means that Bitcoin and the broader cryptocurrency market could still be stuck in a tight range until September, when analysts at Bitfinex believe the first rate cut could occur.
Share this article