Bitcoin has experienced a significant decline recently, dropping to the $85,000 range as sellers exerted heavy pressure on the market. Despite this downward trend, there are emerging signs of a potential recovery, although it has come at the cost of a notable capitulation among Bitcoin holders. This pattern often indicates that the market may be approaching a bottom.
Recent macro momentum indicators suggest a shift in risk expectations among Bitcoin traders. The 25-delta skew has moved sharply into put territory across various maturities, indicating that there is increased demand for downside protection. This trend is particularly pronounced in short-dated options, but there is also a significant shift occurring in longer-term expiries. Notably, six-month puts have gained two volatility points within just one week, reflecting a pivot toward more bearish positioning. Traders are pricing in both immediate risks and potential for a broader decline, a phenomenon usually seen when markets are nearing major cyclical bottom zones as they overshoot on the downside before stabilizing.
Realized losses among Bitcoin holders have surged to levels reminiscent of the fallout from the FTX collapse. Most of this capitulation is being driven by short-term holders, who are selling off in a panic after acquiring Bitcoin at higher prices. The speed and magnitude of these realized losses signal that demand from marginal buyers has been exhausted.
Historically, such aggressive deleveraging marks the final phase of a downturn. When short-term holders sell off in large numbers, long-term holders often step in, facilitating the formation of accumulation zones. This behavior aligns with classical indicators of market bottoms, where widespread capitulation often precedes a recovery.
Currently, Bitcoin is trading at approximately $85,979, remaining just above the crucial support level of $85,204 while defending the $85,000 psychological threshold. The combination of holder capitulation, bearish skew, and substantial realized losses suggests that a market bottom might either be near or already developing.
If this bottoming pattern is confirmed, Bitcoin could see a rebound and potentially surpass the resistance level of $86,822. A successful move above that point may allow for a rally towards $89,800 and then $91,521. Should these barriers be cleared, it could revitalize bullish sentiment and possibly push Bitcoin toward $95,000 in the near term.
Conversely, if selling pressure escalates and macroeconomic conditions remain unfavorable, Bitcoin may struggle to maintain its position above $85,204. A drop below the $82,503 mark would expose the cryptocurrency to further declines, potentially driving it down to $80,000. Such a movement would invalidate the bullish outlook and delay any prospects of recovery.
