Bitcoin Price Outlook: Will it Find a Local Bottom or Experience Further Decline? Insights from Bitfinex Analysts
Bitcoin (BTC) has recently experienced a dip to its lowest level since February 26, hovering around the $57,000 mark amidst significant volatility. Despite this, Bitfinex analysts have identified on-chain signals indicating that the primary cryptocurrency might not undergo further declines.
In the latest Bitfinex Alpha report released this week, data from July 6 and 7 suggests that Bitcoin could be nearing a potential local bottom. The correction in Bitcoin’s price was partly triggered by substantial sales of BTC by the German law enforcement agency, Bundeskrimanalamt (BKA), and the ongoing redemption process for Mt Gox creditors.
The BKA has been transferring substantial amounts of BTC to various exchanges, institutional platforms, and over-the-counter desks. Simultaneously, Mt Gox has initiated repayments totaling $9 billion in assets, including BTC and Bitcoin Cash, with most creditors anticipated to regain control of their claims this month.
These movements of coins have led to heightened BTC selling across all investor segments, fostering market fear, uncertainty, and doubt (FUD). Nonetheless, analysts caution that the impact of these sales may not be as severe as initially perceived due to the actual volume of BTC being dispatched to exchanges.
Market participants anticipate a recovery post the resolution of the supply surplus issue. However, Bitfinex has pointed out that market recuperation could occur sooner than expected due to the sales having already been factored into the market dynamics.
Moreover, indications from various on-chain metrics suggest that the selling pressure has eased, potentially signaling the end of further corrections in the market. Notably, the Coinbase Premium Index, which gauges the variance in BTC prices between Coinbase Pro and other centralized exchanges, has seen a positive shift despite BTC’s continuous price downturn.
The Spent Output Profit Ratio (SOPR) for short-term holders has dipped to 0.97, indicating that this group is currently offloading BTC at a loss, a trend typically preceding a price rebound. Additionally, the average funding rate across all BTC perpetual trading pairs has turned negative for the first time since the May 1 low, reinforcing the notion of BTC stabilizing or approaching a potential local bottom.
In conclusion, while recent events have led to market uncertainties and price fluctuations, the data suggests that Bitcoin may be on the cusp of a turnaround, with selling pressure potentially diminishing and the market poised for a rebound.
