Bitcoin (BTC) Nears Potential Local Bottom Amid Market Volatility, Reports Bitfinex Alpha

Bitcoin
(BTC)
prices
dropped
below
their
120-day
range
on
July
3rd,
reaching
$53,219,
as
the
market
reacted
to
fears
of
potential
selling
by
both
the
German
government
and
Mt.
Gox
creditors,
according
to

Bitfinex
Alpha.
However,
recent
market
data
suggests
that
a
potential
local
bottom
might
be
in
sight.

Market
Reactions
and
Volatility

The
market
has
started
to
contextualize
the
large
nominal
value
of
BTC
transferred
to
exchanges
by
the
German
government
as
relatively
small
compared
to
the
total
Bitcoin
bought
and
sold
since
2023.
This
realization
has
helped
stabilize
some
of
the
initial
fears.

Additionally,
volatility
metrics
have
shown
a
narrowing
spread
between
implied
volatility
and
historical
volatility,
indicating
that
the
market
expects
more
stability
and
less
severe
declines.
This
suggests
that
BTC
could
range
at
current
levels
or
experience
less
dramatic
drops.

Short
Liquidations
and
Market
Positioning

High
short
liquidations
have
been
observed,
indicating
a
significant
number
of
‘late
shorters’
on
lower
time
frames
and
potentially
a
lack
of
clear
market
direction.
This
market
positioning
shows
a
degree
of
complacency
with
shorts,
as
seen
in
the
recent
rebounds.

Long-term
Bitcoin
holders
continue
to
realize
significant
profits
on
their
spot
holdings,
while
short-term
holder
selling
might
be
nearing
exhaustion.
The
Spent
Output
Profit
Ratio
(SOPR)
for
short-term
holders
is
at
0.97,
indicating
that
this
cohort
is
now
selling
at
a
loss.
Historically,
when
the
SOPR
has
been
at
this
level,
prices
have
rebounded
as
selling
pressure
eased.

Funding
Rates
and
Market
Sentiment

The
funding
rate
across
BTC
perpetual
contracts
has
turned
negative
for
the
first
time
since
the
May
1st
bottom.
While
this
might
indicate
increased
bearish
sentiment,
it
also
suggests
that
BTC
might
be
stabilizing
or
nearing
a
potential
bottom
as
the
balance
of
buying
and
selling
pressures
evolves.

Periods
of
negative
funding
rates
combined
with
low
short-term
SOPR
values
have
often
marked
the
bottom
of
price
corrections.
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.

Macro
Economic
Indicators

The
Federal
Reserve
minutes
show
that
officials
remain
highly
cautious
about
cutting
rates,
despite
supportive
labor
market
data
and
easing
inflation.
The
unemployment
rate
has
risen
to
4.1
percent,
the
highest
since
November
2021,
signaling
an
economy
adjusting
to
long-term
growth
and
hiring
trends.

There
has
been
a
notable
slowdown
in
payroll
growth,
with
111,000
fewer
jobs
created
in
April
and
May
than
previously
estimated.
The
median
duration
of
unemployment
rose
from
8.9
months
in
May
to
9.8
months
in
June,
indicating
longer
job
search
periods.
The
number
of
job
openings
per
unemployed
person
held
steady
at
1.22,
and
the
quit
rate
remained
unchanged
at
2.2
percent,
suggesting
no
additional
wage
pressure
from
workers
quitting.

The
Institute
for
Supply
Management’s
Manufacturing
Purchasing
Managers
Index
contracted
in
June,
dropping
to
48.5,
its
lowest
since
February.
Sub-indices
for
production,
new
orders,
and
inventories
all
declined,
reflecting
reduced
demand
and
sentiment.
Employment
in
manufacturing
also
fell.
Similarly,
the
non-manufacturing
PMI
fell
to
48.8,
its
lowest
in
four
years,
indicating
contraction
in
the
services
sector.

While
a
rate
cut
is
not
expected
at
the
next
policy
meeting
scheduled
for
July
30-31,
there
is
hope
for
a
potential
cut
in
September.

Image
source:
Shutterstock