Local Bottom or More Pain for Bitcoin’s Price? Bitfinex Analysts Chip In

Although Bitcoin (BTC) has fallen to its lowest level since February 26 and hovered around the $57,000 range over the past few days amid high volatility, Bitfinex analysts have seen on-chain signs that the leading crypto asset may not record any further declines.

According to this week’s release of Bitfinex Alpha a reportMarket data from July 6 and 7 suggests that a potential local bottom for Bitcoin is imminent.

Bitcoin May Hit New Local Low Soon

Bitcoin’s correction was, in part, driven by massive bitcoin sales by Germany’s law enforcement agency, the Bundeskrimanalamt (BKA), and creditor recovery from the defunct Mt Gox cryptocurrency exchange.

While BKA has moved large amounts of BTC to exchanges, institutions, and over-the-counter sales desks, Mt Gox has begun repaying $9 billion in assets, including BTC and Bitcoin Cash, with most creditors expected to receive custody of their claims this month.

These currency movements have led to Bitcoin sales among all types of investors, increasing fear, uncertainty and doubt in the market. However, analysts have warned that the impact of the sales is less significant than initially appeared due to the actual amount of Bitcoin sent to exchanges.

Market participants believe that any recovery will come after the market deals with the excess supply; however, Bitfinex noted that the market may recover before that because the sales are priced in.

Selling pressure has decreased.

In addition to the pricing of the large BTC selloff, several on-chain indicators suggest that the pressure has eased, and the market may not see another correction. One such indicator is the Coinbase Premium Index, which measures the percentage difference between the price of BTC on Coinbase Pro and other centralized exchanges.

The decline in Coinbase’s premium indicates strong selling pressure on spot exchange markets from mining companies, funds, ETFs, and government entities. The premium was low in June as BTC selling pressure increased, but it suddenly turned positive despite BTC’s persistently falling price. This indicates that selling pressure on Coinbase has decreased.

Another measure is the Spend Profit Ratio (SOPR) for short-term holders, which reached 0.97. This indicates that this group of investors is now selling Bitcoin at a loss, which usually precedes a price recovery.

Additionally, the average funding rate across all Bitcoin perpetual trading pairs turned negative for the first time since the bottom on May 1, reinforcing the idea that Bitcoin may be stabilizing or approaching a potential local bottom.