After facing a massive sell-off in June, Bitcoin might have potentially reached a local bottom, according to a new report by analysts from the Bitfinex exchange.
Bitcoin’s price plummeted below the 120-day range on July 3, dropping to as low as $53,219 amid increasing fear, uncertainty, and doubt related to the start of Mt. Gox’s creditor repayments and other issues.
Bitfinex Analysis
Bitfinex analysts suggested on July 8 that Bitcoin might have reached a local bottom based on market data over the weekend. This conclusion was drawn even though Mt. Gox has yet to distribute 94,457 BTC, which accounts for about 67% of the total BTC collected for creditor repayments.
Bitfinex also mentioned that the drop in BTC was partly triggered by the German law enforcement agency Bundeskriminalamt (BKA), which started selling Bitcoin on exchanges, causing high-volume selling from different types of investors.
Reasons for Optimism
According to Bitfinex, there are multiple reasons why Bitcoin’s decline might soon stabilize. One significant factor is that despite the sizeable nominal value of BTC transferred to exchanges by the German government, it represents a relatively small proportion of all Bitcoin traded since 2023.
The analysts highlighted that the realized capitalization of Bitcoin flowing into the market since 2023 — or the value of BTC bought and sold — amounts to $224 billion. In comparison, only $9 billion worth of Bitcoin seized and subsequently sold by governments, including the United States and Germany, constitutes merely 4% of the total cumulative realized value since 2023.
“Despite the large nominal value, the actual number of Bitcoins transferred to exchanges amounts to only hundreds of millions of dollars, which suggests that the real market impact and the supply overhang from government-seized Bitcoins are relatively minimal,” the report noted.
Indicators of a Potential Bounce
Other factors potentially suggesting that Bitcoin might be poised for a rebound include the drop in the spent output profit ratio (SOPR) coupled with negative funding rates.
SOPR is a financial metric that measures the realized profit or loss on a given day for wallets within a specific cohort of investors. It is calculated by comparing the combined USD value of all coins spent to the value of these coins when they were initially acquired.
According to Bitfinex’s research, SOPR for short-term holders reached 0.97 as of July 6, indicating that short-term investors are not selling at a loss. Additionally, the average funding rate across all BTC perpetual trading pairs flipped negative for the first time since the bottom on May 1.
“Historically, periods of negative funding rates combined with low short-term SOPR values have often marked the bottom of price corrections,” Bitfinex wrote, adding, “Negative funding rates suggest that selling pressure is high or sellers are dominating the market, but it can also indicate that the market is oversold. When this oversold condition aligns with a recovering SOPR, it often signals that the market is finding a floor.”
| Metric | Value/Status | Implication |
|---|---|---|
| BTC Price | Dropped to $53,219 | Potential local bottom |
| Mt. Gox BTC Repayments | 94,457 BTC pending | Increased market pressure |
| German BTC Sales | Significant sales by BKA | High-volume selling pressure |
| Realized Capitalization | $224 billion since 2023 | Large market activity |
| Government BTC Sales | $9 billion (4% of total) | Minimal impact compared to total market |
| SOPR (Short-term Holders) | 0.97 | Short-term holders not selling at a loss |
| Funding Rates | Negative | Indication of market being oversold |
The recent analysis by Bitfinex suggests that Bitcoin may have reached a local bottom, despite ongoing pressures such as the Mt. Gox repayments and government sales. The combination of negative funding rates and a low SOPR for short-term holders could indicate that the market is oversold and potentially finding a floor. As these indicators align, investors and market participants will be closely watching for signs of stabilization and a possible rebound in Bitcoin’s price.
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