The recent market downtrend has left many bitcoin investors and market enthusiasts in confusion. This is because predictors and a few factors point to a further downtrend, while some claim that the world’s leading crypto sits at a powerful support zone.
Obviously, BTC witnessed a significant price recovery last week, jumping by about 15% to surpass $93,000. However, this move was short-lived, as it plunged by $84,000 on Monday amid heavy selling by many holders, setting the new week off to a rough start.
Deleveraging and Capitulation
Considering factors such as capitulation, deleveraging, and seller exhaustion, the latest Bitfinex Alpha release suggests bitcoin is very close to a bottom, marking its lowest point of this cycle before recovering to hit new highs.
One factor hinting at a bottom is extreme deleveraging. Undoubtedly, thousands of speculators and leverage traders have been forcibly thrown out of the market, starting with the October 10 crash that resulted in over $19 billion in liquidations.
After this flush of risky traders, the crypto market is expected to become more stable and healthier for investors and long-term holders. This also aligns with a recent prediction from Fundstrats’ Tom Lee, who noted that once the market has completed this flushing, it could hit new highs.
In addition to extreme deleveraging, short-term holder capitulation is another factor hinting at a bitcoin bottom. Many retail traders, weekend FOMO buyers, and new and nervous investors have reacted emotionally to the market dip, panic-selling their holdings in shock.
Hence, Entity-Adjusted Realised Losses have reached a peak of over $400 million, surpassing losses during previous major market lows. This rate of losses suggests that capitulation is nearing an end, and once selling pressure is no longer there, the bitcoin price stabilizes.
Seller Exhaustion
A close look at bitcoin’s price chart over the past few days hints at seller exhaustion, as it is filled with many small candlesticks, suggesting that panic and fear have almost burned out, and selling pressure has reduced. Thus, the conclusion that bitcoin is near a bottom.
Meanwhile, some institutional investors have not let the downtrend blur their bullish expectations. This is evident in the massive four-day inflow streak on the U.S.-listed Bitcoin exchange-traded funds (ETFs).