The recent downtrend in the market has thrown many Bitcoin investors and market enthusiasts into confusion. This is because some argue that the world's leading cryptocurrency is in a strong support zone, while predictive factors and several factors point to a further downtrend.
Apparently, BTC witnessed a significant price recovery last week, rising by around 15% to over $93,000. However, this move did not last long and the new week got off to a tough start, with the stock plummeting by $84,000 on Monday amid heavy selling by many holders.
Deleveraging and capitalizing
The latest Bitfinex Alpha release suggests that, considering factors such as capitulation, deleveraging, and seller exhaustion, Bitcoin is very close to the bottom, marking the lowest point of this cycle before recovering and making new highs.
One factor that suggests a bottom is extreme deleveraging. Undoubtedly, thousands of speculators and leveraged traders were forced out of the market starting with the October 10 crash that resulted in more than $19 billion in liquidations.
After this exodus of risky traders, the cryptocurrency market is expected to become more stable and healthier for investors and long-term holders. This is in line with a recent prediction from Fundstrats' Tom Lee, who said the market could reach new highs once it completes this flush.
In addition to extreme deleveraging, the capitulation of short-term holders is another factor that suggests a bottom for Bitcoin. Many individual traders, weekend FOMO buyers, and new nervous investors reacted emotionally to the market decline, selling their holdings in a shocked panic.
Accordingly, entity-adjusted realized losses peaked at more than $400 million, exceeding losses at previous major market lows. This loss rate suggests that the capitulation is nearing an end, and Bitcoin price will stabilize once the selling pressure is removed.
seller exhaustion
If you look closely at the Bitcoin price chart over the past few days, it is filled with many small candlesticks, suggesting seller fatigue as the panic and fear is almost burnt out and the selling pressure is decreasing. Therefore, the conclusion is that Bitcoin is near the bottom.
On the other hand, some institutional investors have not wavered in their bullish expectations despite the downtrend. This is evidenced by four consecutive days of heavy inflows into US-listed Bitcoin exchange traded funds (ETFs).
