Two Analysis Firms Issue Bottom Line: "Bitcoin's Downturn Ends! But One Last…"
Bitcoin (BTC) fell to the $80,000 mark last week amid the ongoing downtrend.
However, BTC started the new week with a recovery and rose to the level of $86,000.
Analysts said this indicated that selling pressure was easing.
Bitcoin Bottom Signals!
At this point, CryptoQuant analyst Darkfost first said that there has been a sharp decline in BTC open interest and that it may indicate a bottom in the market.
CryptoQuant analyst noted that BTC open interest fell to 1.3 million BTC on November 23, marking the sharpest 30-day decline of the current cycle.
He reported that a sharp decline in Bitcoin open interest could be an indication that the market is forming a bottom.
This trend suggests that investors are closing futures positions to mitigate risk due to ongoing forced liquidations caused by recent price declines.
At this point, the analyst also noted that sharp declines in open interest usually occur during bottoming periods, and therefore this deleveraging could also be a precursor to a new bull run.
“The current situation is a phase where open positions are liquidated and market balance is achieved by reducing speculative bets.
Such a ‘cleansing process’ has historically been repeated just before returns to an uptrend.
The last similar 30-day decline occurred during the 2022 bear market.
Bitcoin May Experience Another Downward Wave!
Finally, cryptocurrency analysis company Swissblock analyzed that the market has experienced a sharp decline in the risk aversion indicator, indicating that the selling pressure on BTC has eased and the market has left the capitulation phase behind.
However, the analyst firm noted that another relatively weaker sell-off is likely, which is typically a sign of sellers exhaustion and paves the way for the start of a rally.
“Early signs have emerged that Bitcoin has formed a bottom. Selling pressure has eased significantly as risk aversion indicators have declined.
However, the initial recovery is usually followed by a weak second selling wave; if the bottom holds at that moment, this can be interpreted as a bottoming signal.
*This is not investment advice.