K33 Research indicates Bitcoin is in a historically oversold zone, with signs of a potential recovery despite recent market pressures.
K33 Research has indicated that Bitcoin has entered its third-deepest oversold zone in its history, following a significant five-month price decline. Vetle Lunde, the firm's head of research, noted that the cryptocurrency's weekly Relative Strength Index (RSI) has dropped to 26.84, a level rarely seen before.
The recent downturn has been attributed to actions by long-term holders and institutional investors, particularly in the fourth quarter. Key observations include:
- A sharp decline in the supply of coins held for over six months.
- ETFs have seen a loss of nearly 100,000 BTC.
- Open interest in CME futures has reached two-year lows.
Despite these pressures, Lunde remarked that the outflow of Bitcoin is beginning to stabilize.
Market Sentiment Analysis
K33 analysts highlighted the derivatives markets as a crucial indicator of current sentiment. Recently, the average 30-day funding rate for Bitcoin perpetual futures turned negative for the tenth time since 2018, suggesting that traders are reducing long positions or initiating short ones, resulting in futures trading at a discount to spot prices.
The options market reflects a similar trend, with traders actively seeking downside protection and paying high premiums for bearish positions. Historically, such negative funding rates have often preceded price increases for Bitcoin, with average returns of 13% over 30 days and 62% over 90 days.
Signs of Recovery
In spite of bearish sentiment in derivatives, Bitcoin has shown resilience amid geopolitical tensions, such as recent conflicts in the Middle East. While oil and gas prices surged and stock markets declined, Bitcoin recorded a modest uptick. Lunde attributes this stability to significant risk reduction among institutional players, who have decreased their exposure by about one-third and saw ETF investors withdraw approximately 90,000 BTC in the past five months.
Additionally, the pressure from long-term holders has begun to ease, with a rising volume of coins older than six months. Currently, Bitcoin is trading around $71,600, reflecting a 6.7% increase in the last 24 hours and consolidating near its 200-week moving average, historically associated with market lows.
"The worst is behind us. Now we wait. We see no reason to sell Bitcoin at current levels," Lunde stated.
This perspective aligns with earlier comments from VanEck CEO Jan van Eck, who noted that Bitcoin is approaching a local bottom influenced by its four-year halving cycle.
