Although bitcoin (BTC) has fallen to its lowest level since February 26 and has hovered around the $57,000 range over the last few days amid high volatility, Bitfinex analysts have seen on-chain signs that the leading crypto asset may not record any more dumps.
According to this week’s edition of the Bitfinex Alpha report, market data from July 6 and 7 suggest that a potential local bottom for BTC is close.
Bitcoin May Record Local Bottom Soon
Bitcoin’s correction was, in part, triggered by the huge BTC sales by the German law enforcement agency, the Bundeskrimanalamt (BKA), and the defunct crypto exchange Mt Gox creditor redemptions.
While the BKA has been transferring large amounts of BTC to exchanges, institutional, and over-the-counter desks, Mt Gox has begun repayments of $9 billion in assets, comprising BTC and Bitcoin Cash, and most creditors are expected to get custody of their claims this month.
These coin movements have triggered BTC selling across all investor cohorts, increasing market fear, uncertainty, and doubt (FUD). However, analysts have warned that the impact of the sales is less substantial than it initially appeared to be due to the actual amount of BTC being sent to exchanges.
Market participants believe any recovery will be seen after the market deals with the supply overhang; however, Bitfinex noted that the market could recover before that because the sales have been priced in.
Selling Pressure is Diminishing
Besides the large BTC sales being priced in, several on-chain indicators suggest that the pressure has been alleviated, and the market may see no further correction. One such is the Coinbase Premium Index, which measures the percentage difference between BTC price on Coinbase Pro and other centralized exchanges.
A low Coinbase Premium indicates strong selling pressure on the exchange’s spot markets from miners, funds, ETFs, and government entities. The premium was low in June as BTC selling pressures increased, but it has suddenly turned positive despite the BTC price continuously falling. This suggests that selling pressure has declined on Coinbase.
Another metric is the Spent Output Profit Ratio (SOPR) for short-term holders, which has reached a value of 0.97. This indicates that this investor cohort is now selling BTC at a loss, which usually precedes a price rebound.
In addition, the average funding rate across all BTC perpetual trading pairs has become negative for the first time since the May 1 bottom, reinforcing the notion that BTC may be stabilizing or nearing a potential local bottom.
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