The first cryptocurrency has entered its third-deepest oversold zone in history, as noted by K33's head of research, Vetle Lunde.

After five months of decline—one of the longest downturns for the asset—the weekly RSI for Bitcoin plummeted to 26.84. Such low levels have only been observed a few times before.

According to the analytical firm, recent pressure on prices has come from long-term holders and institutional investors. In the fourth quarter, the following deviations were recorded:

  • The supply of coins older than six months sharply decreased;
  • ETFs lost nearly 100,000 BTC;
  • The open interest in CME futures fell to two-year lows.

However, Lunde noted that the outflow has begun to slow down.

Bearish Sentiment

K33 analysts identified the derivatives markets as one of the most telling indicators of current sentiment. The average 30-day funding rate for Bitcoin perpetual futures recently turned negative—marking the tenth such occurrence since 2018.

Negative rates indicate that market participants are actively reducing long positions or opening short ones. As a result, perpetual futures begin trading at a discount to the spot price.

A similar situation has emerged in the options sector. Traders are actively buying downside protection and are willing to pay a significant premium for bearish bets, Lunde noted.

However, previous instances of such negative funding often led to Bitcoin price increases, especially over longer timeframes.

Historical data shows that after such phases, the average return over 30 days was around 13% (with a 56% success rate), over 90 days it was 62% with a 78% success probability, and over six months, the average return reached 101% with the same success rate.

"The Worst Is Behind Us"

Despite the defensive stance in the derivatives market, Bitcoin has shown relative resilience amid the escalation of conflict in the Middle East. Following U.S. and Israeli strikes on Iran and subsequent responses, oil and gas prices surged while stock markets fell. Digital gold recorded a "modest" increase.

Lunde explained this dynamic as a result of significant risk reduction in previous months. Institutional players on CME reduced their exposure by about a third, while ETF investors withdrew around 90,000 BTC over the last five months.

At the same time, pressure from long-term holders is easing. The volume of coins older than six months is starting to rise, the analyst emphasized.

Bitcoin is also consolidating around the 200-week moving average—a level that has historically coincided with market lows. At the time of writing, the asset is trading around $71,600, having jumped 6.7% in the last 24 hours.

Hourly chart of BTC/USDT on Binance. Source: TradingView.

"The worst is behind us. Now we wait. We see no reason to sell Bitcoin at current levels," Lunde concluded.

Recall that in early March, VanEck CEO Jan van Eck stated that the price of digital gold was nearing a local bottom. According to him, prices continue to be influenced by the four-year halving cycle.