Bitfinex Alpha reveals that selling pressure has reduced and BTC is near its lowest point this cycle.
The recent downward trend in the market has confused many investors and Bitcoin market enthusiasts. Indeed, predictors and a few factors point to a new downtrend, while some claim that the world’s leading crypto is in a powerful support zone.
Clearly, BTC saw a significant price recovery last week, jumping around 15% to surpass $93,000. However, this move was short-lived, as it plunged $84,000 on Monday amid heavy selling by many holders, making for a rocky start to the new week.
Deleveraging and capitulation
Considering factors such as capitulation, deleveraging, and seller exhaustion, the latest Bitfinex Alpha release suggests that bitcoin is very close to a bottom, marking its lowest point of this cycle before recovering to reach new highs.
One factor pointing to a bottom is extreme deleveraging. There is no doubt that 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 wave of risky traders, the crypto market is expected to become more stable and healthier for investors and long-term holders. This also lines up with a recent prediction from Tom Lee of Fundstrats, who noted that once the market completes this flush, it could reach new highs.
Besides extreme deleveraging, the capitulation of short-term holders is another factor pointing to a bottom for Bitcoin. Many retail traders, weekend FOMO buyers, and new and nervous investors reacted emotionally to the market decline, selling their holdings in panic, out of shock.
As a result, entity-adjusted realized losses peaked at over $400 million, surpassing losses recorded during previous major market lows. This rate of losses suggests that the capitulation is coming to an end and that once the selling pressure is no longer present, the Bitcoin price will stabilize.
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Seller Exhaustion
A close look at the Bitcoin price chart over the past few days suggests seller exhaustion, as it is filled with many small candlesticks, suggesting that panic and fear have almost died down and selling pressure has lessened. Hence the conclusion that Bitcoin is close to a bottom.
Meanwhile, some institutional investors haven’t let the downtrend cloud their bullish expectations. This is evident in the four consecutive days of massive inflows into US-listed Bitcoin exchange-traded funds (ETFs).
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