Bitfinex suggests Bitcoin may have hit its local bottom

Bitcoin may have hit a local bottom after experiencing a significant sell-off in June, according to a report by analysts from Bitfinex exchange. The price of Bitcoin dropped below the 120-day range on July 3, reaching as low as $53,219. This decline was attributed to increasing fear and uncertainty surrounding the start of Mt. Gox’s creditor repayments and other issues. However, Bitfinex analysts suggest that Bitcoin may have reached a local bottom based on market data over the weekend. It is worth noting that Mt. Gox is yet to distribute 94,457 BTC to creditors, which accounts for about 67% of the total BTC in repayments collected. Bitfinex also mentioned that the drop in BTC price was partially triggered by the German law enforcement agency, Bundeskriminalamt (BKA), selling Bitcoin on exchanges and causing high-volume selling from various types of investors. Despite these challenges, Bitfinex believes that Bitcoin should soon stop declining for several reasons. Firstly, the BTC transferred to exchanges by the German government, though significant in nominal value, is relatively small when compared to the total Bitcoin bought and sold since 2023. The realized capitalization of Bitcoin flowing into the market since 2023 amounts to $224 billion, while only $9 billion worth of Bitcoin has been seized and sold by governments, including the United States and Germany. This amounts to only 4% of the total cumulative realized value since 2023. Bitfinex analysts argue that the market impact and supply overhang from government-seized Bitcoin are relatively minimal. Another factor suggesting that Bitcoin may bounce back in the near future is the drop in the spent output profit ratio (SOPR) and negative funding rates. SOPR is a financial metric that measures the realized profit or loss on a given day for wallets belonging to a specific group of investors. A SOPR of 0.97, as of July 6, indicates that short-term investors are not selling at a loss. Additionally, the average funding rate across all BTC perpetual trading pairs has turned negative for the first time since May 1. Historically, periods of negative funding rates combined with low short-term SOPR values have often marked the bottom of price corrections. Overall, Bitfinex’s report suggests that Bitcoin may have reached a turning point and could potentially see a recovery in the near future.