Bitcoin has reached one of the most oversold levels in its history, which may indicate an approaching potential market reversal.
This is reported by Finway
The Market is in a State of Extreme Oversold Conditions
Over the past six weeks, Bitcoin has shown a consistent decline, with the overall downturn lasting for five months. Experts from the research and brokerage firm K33 note that the current market situation is one of the most depressed in recent years. Analysts emphasize that the derivatives market is in an extremely bearish state, and investors are exhibiting a high level of pessimism.
K33’s head of research, Vetle Lunde, stresses that such deep phases of oversold conditions typically precede periods of growth. He compares the situation to historical periods when, after prolonged selling pressure, the price of Bitcoin rebounded.
“The worst is behind us, now we wait,” said Lunde.
According to K33, the Relative Strength Index (RSI) has currently dropped to 26.84, which is the third lowest reading in the history of observations. The main drivers of the recent decline have been sell-offs by long-term holders and institutional investors, as well as a decrease in the volume of coins held for over six months. Institutional traders have reduced their positions by approximately 100,000 BTC, and open interest in futures on the CME Group has fallen to a two-year low.
An additional signal of bearish sentiment has been the negative funding rate in the perpetual futures market, observed for only the tenth time since 2018. This indicates an increase in demand for short positions and active trading of futures at a discount to the spot price.
Opportunities for Growth and the Impact of Geopolitics
According to K33 analysts, historically, periods of negative funding have often ended with subsequent recoveries in Bitcoin. The average return 30 days after such phases was around 13%, with a probability of achieving a positive outcome reaching 56%. Over longer time frames (90 and 180 days), the average returns were 62% and 101%, respectively, with a success probability of about 78%.
Lunde also noted that Bitcoin has shown resilience amid geopolitical tensions in the Middle East. Following U.S. and Israeli airstrikes on Iran, as well as in response to rising oil and gas prices and falling stock markets, the first cryptocurrency exhibited moderate growth.
According to K33 data, institutional exposure on the CME has decreased by approximately 35%, and investors in spot ETFs have reduced their positions by 90,000 BTC over the past five months. The company’s experts emphasize that the current risk-to-reward ratio favors accumulating Bitcoin rather than selling.
The company concludes that after a prolonged period of selling pressure and a significant decline, Bitcoin has substantial potential for recovery.