Bitcoin hits bottom, but market updates still pose risks: Bitfinex
Bitcoin experienced a price drop to $53,219 on July 3rd, but indications of stabilization emerged over the weekend, suggesting a potential local bottom. Market data highlights a narrowing volatility spread and negative funding rates, signaling a shift in sentiment.
The initial decline in Bitcoin prices was influenced by concerns over selling pressure from the German government and Mt. Gox creditors. However, traders reevaluated the impact of the German government’s Bitcoin transfers to exchanges, realizing it represented a small fraction of total Bitcoin transactions since 2023. Moreover, volatility metrics show a reduced spread between implied and historical volatility, indicating improved market stability.
Short-term holders seem to be reaching selling exhaustion, as evidenced by the Spent Output Profit Ratio (SOPR) for this group at 0.97, indicating sales at a loss. Historically, such conditions have preceded price rebounds by alleviating selling pressure.
Funding rates for Bitcoin perpetual contracts turned negative for the first time since May 1st, hinting at a potentially oversold market. Coupled with low short-term SOPR values, these conditions often signal the conclusion of price corrections.
While long-term Bitcoin holders continue to realize substantial profits, short sellers exhibit a sense of complacency in the market. Despite high numbers of short liquidations, even during the market rebound on July 7th, it suggests a lack of clear directional conviction among traders.
Recent US economic data suggests that an interest rate cut is unlikely at the upcoming Fed meeting on July 31st. This implies that Bitcoin and the broader crypto market may remain range-bound until September, when analysts at Bitfinex anticipate the possibility of the first rate cut.
In conclusion, Bitcoin’s recent price movements reflect a mix of market sentiment, technical indicators, and macroeconomic factors, shaping the outlook for the cryptocurrency in the near term.
