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Bitcoin Bottoms Out, But Market News Still Threatens: Bitfinex
Key points
- Bitcoin price dropped to $53,219 on July 3, but showed signs of stabilizing over the weekend.
- Market data points to a potential local bottom, with a narrowing of the volatility spread and negative funding rates.
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Bitcoin prices have rebounded after falling below $53,219 on July 3, reaching a potential local low according to the latest edition of the Bitfinex Alpha report. The initial price decline was triggered by fears of a sell-off by the German government and Mt. Gox creditors.
Market sentiment has shifted as traders reassess the impact of German government Bitcoin transfers on exchanges, recognizing it as a relatively small percentage of total Bitcoin transactions since 2023. Additionally, volatility metrics point to a narrowing of the spread between implied and historical volatility, suggesting greater market stability.
In particular, the behavior of short-term holders points to potential exhaustion of selling, with the Spent Output Profit Ratio (SOPR) for this group at 0.97, indicating loss-making selling. Historically, such conditions have preceded price rebounds as selling pressure eases.
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 signaled the end of price corrections in the past.
While long-term Bitcoin holders continue to make significant profits, market positioning shows complacency among short sellers. This is evidenced by the high number of short liquidations, even during the July 7 market rally, which suggests a lack of clear directional conviction among traders.
However, recent US economic data suggests that an interest rate cut is unlikely at the next Fed meeting, scheduled for July 31. This means that Bitcoin and the broader cryptocurrency market could still remain stuck in a tight range until September, when Bitfinex analysts believe the first rate cut could come.
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