Bitcoin's drop to $60,000 may indicate a local bottom, with analysts noting investor capitulation signs and record trading activity.
Bitcoin's recent decline to $60,000 may signal a local bottom, according to analysts from K33 Research. They have observed signs of investor capitulation across various market segments, including spot markets, ETFs, and derivatives.
Vetle Lunde, K33's head of research, highlighted several key indicators:
- Trading volumes soared to the 95th percentile, indicating high activity levels;
- Funding rates dropped to levels reminiscent of the March 2023 banking crisis;
- The options market skew reverted to bearish levels last seen in 2022.
Momentum indicators also reflect extreme oversold conditions. The daily Relative Strength Index (RSI) fell to 15.9, marking one of the lowest readings since 2015, surpassed only during significant market downturns in March 2020 and November 2018.
The Fear and Greed Index reached a historical low of 6 points during this sell-off, demonstrating severe investor pessimism as Bitcoin neared the $60,000 threshold. Lunde suggested that such market conditions typically align with cyclical lows, implying that the recent downturn may have established this local bottom.
Surge in Trading Activity and Derivative Market Pressures
Lunde noted that the price fluctuations were accompanied by intense trading activity. By February 6, Bitcoin's two-day spot trading volume hit $32 billion, among the highest ever recorded.
Trading levels during February 5 and 6 remained in the 95th percentile, a phenomenon only previously observed during the FTX exchange collapse. This surge often indicates the passing of local extremes, typically followed by consolidation and retesting of lows.
In the derivatives market, tensions persist. On February 6, the annual funding rate for perpetual Bitcoin swaps fell to -15.46%, the lowest since the banking crisis last March, while the weekly average fell to -3.5%, a new record low since September 2024. The options market skew has shifted to an "extremely protective zone," similar to values seen during past crises such as the Terra collapse and the FTX bankruptcy.
In addition, U.S. spot Bitcoin ETFs experienced record activity, with trading volumes exceeding $10 billion on February 5. However, the same day also saw the fifth-largest net outflow since these funds began, with a total of 13,670 BTC withdrawn since February 3.
K33 predicts that Bitcoin will undergo prolonged price consolidation within the $60,000 to $75,000 range. While experts anticipate a decline in trading activity and a potential retest of support levels, they see no fundamental reasons for prices to fall below this recent local minimum. Analysts at Glassnode characterized the recent decline as "moderate."
