Bitcoin Stabilizes as Derivatives Indicators Signal Potential Bottom, Analysts Say

Bitfinex analysts note narrowing volatility spreads and potential exhaustion of short-term seller pressure, indicating market stabilization.

Key Insights

  • Bitcoin stabilizes above $57,000 after recent volatility, with derivatives market indicators suggesting a potential local bottom has been reached.
  • Bitfinex analysts note narrowing volatility spreads and potential exhaustion of short-term seller pressure, indicating market stabilization.

NEW YORK (MarketsXplora) – Bitcoin appears to be stabilizing after a week of heightened volatility, with derivatives market indicators suggesting the cryptocurrency may have reached a local bottom, analysts at Bitfinex said on Tuesday.

The world’s largest cryptocurrency by market capitalization dropped to a local low of $53,219Β last Wednesday, breaking below its 120-day range amid fears of selling pressure from the German government and Mt. Gox creditors. Since then, bitcoin has rebounded above the $57,000 mark.

As of 4:22 p.m. ET, bitcoin was trading at $57,156, according to CoinMarketCap data.

Bitcoin rebounds above the $57,000 mark. Source: CoinMarketCap

“Derivatives market data suggests that a potential local bottom has been reached for bitcoin,” Bitfinex analysts told MarketsXplora.

They noted that the spread between implied and historical volatility has narrowed by nearly 90%, indicating traders expect prices to stabilize within a range.

While options open interest shows a lack of directional conviction, long-term holders continue to realize profits. However, short-term holder selling might be nearing exhaustion, with the Spent Output Profit Ratio (SOPR) for this group at 0.97, suggesting they are now selling at a loss – a condition that has historically preceded price rebounds.

Citi Forecasts Eight Fed Rate Cuts as Bitcoin Shows Signs of Stabilization

In a separate development, Citi Bank analysts forecasted eight Federal Reserve rate cuts over the next year, citing deflationary data. The bank predicts a rate-cutting cycle starting in September 2024 and extending to July 2025, potentially lowering the benchmark rate from the current 5.25%-5.5% range to 3.25%-3.5%.

Citi’s analysts also highlighted signs of weakness in the latest U.S. jobs report, noting a decline of 49,000 temporary services jobs in June – a trend typically observed around recessions.

The Chicago Mercantile Exchange (CME) FedWatch tool indicates that interest rate traders have increased the probability of a September rate cut from 71% to 73.6% over the past week.

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