Bitcoin’s recent selloff saw its price plummet to $67,983.55, raising concerns that the cryptocurrency may be entering a late-stage bear market phase. Vetle Lunde, head of research at K33, suggests that while current market conditions echo the late September and mid-November scenarios of 2022—timeframes that preceded extended periods of consolidation—investors should not anticipate a rapid recovery.
During those earlier downturns, Bitcoin’s value hit lows between $15,000 and $20,000, marking a significant 70% decrease from its 2021 peak. Presently, Bitcoin seems to have stabilized within a narrower range of $65,000 to $70,000. Utilizing a regime model that examines derivatives data, ETF flows, technical signals, and macroeconomic indicators, K33 Research posits that the market may be nearing a cyclical trough.
A notable characteristic of this current phase is the marked reduction in trading activity, which indicates a cooldown after recent liquidation cascades. A report from K33 highlights a steep 59% drop in spot trading volumes compared to the previous week. Additionally, perpetual futures open interest has declined to a four-month low, with funding rates remaining negative across various segments.
This cooling-off period is expected as market participants process losses and reconsider their positions. U.S.-listed bitcoin exchange-traded funds (ETFs) have reported a dramatic peak-to-trough decline in exposure of 103,113 BTC since early October. Lunde points out that, despite Bitcoin’s significant retracement of nearly 50%, over 90% of peak exposure in Bitcoin terms is still intact.
Sentiment metrics reflect the current market angst, as the “Crypto Fear and Greed” Index recently fell to an unprecedented low of 5 and has stayed below 10 for the majority of the past week.
Lunde’s analysis indicates that Bitcoin might be at, or very close to, a global bottom but is likely to experience prolonged consolidation within the $60,000 to $75,000 range. Historically, similar market conditions have yielded muted returns, yet for investors with a long-term perspective, he argues that current price levels present a favorable opportunity for accumulation, despite the need for patience.
Onchain analyst James Check, co-founder of Checkonchain, contributes his insights, emphasizing that Bitcoin often undergoes extended periods of sideways movement only to then experience sudden and substantial price increases. He noted that during these periods, Bitcoin “does nothing” for extended stretches, followed by explosive repricing phases that are frequently condensed into a few significant trading days.
Check warns investors against the common pitfall of trying to perfectly time market tops and bottoms, as doing so may lead to missing the initial surge when prices rebound. In essence, while the current consolidation phase may be seen as frustrating, historical trends have shown that markets favor disciplined positioning over attempting to predict precise moments of upswings.
