Bitcoin (BTC) has established a local bottom at $56,000 for its current trading range following a 17.5% decline from an all-time high of $73,700.
Bitfinex analysts revealed in the latest edition of the Bitfinex Alpha report that the primary factor behind BTC setting a bottom is the stabilization of flows into spot Bitcoin exchange-traded funds (ETFs). This shows that demand for the asset is beginning to slow down, allowing the market to find its equilibrium.
Bitcoin Establishes Local Bottom
Historical Bitcoin market cycle patterns show that significant declines from local highs have never been more than 23%. This was seen in the bear market bottom in November 2022, when BTC slumped below $15,500. The average correction in this cycle, including intra-day flash crashes mostly triggered by leverage, hovered within the 20% to 22% range.
With Bitcoin’s last correction sitting at 17.5%, analysts believe the current cycle is following the steps of previous ones.
Bitfinex’s claim is further substantiated by the realized price of short-term BTC holders, which hovers around $55,800, serving as a major support and resistance level in this cycle. A decline to $56,000 would align BTC with the maximum plunge expected by analysts, amounting to 23-24%, as witnessed historically. The $56,000 level could also be pivotal for Bitcoin’s short-term market trajectory.
“Regardless of these levels it is important to note that BTC has already corrected 17.5 percent which is close to the average downturn from local highs since the bear market bottom. Regardless of whether we see BTC move lower, we do not expect a V-shaped recovery as has been the case for previous dips since 2023,” analysts clarified.
Bitcoin ETFs See Negative Flows
Last week, spot Bitcoin ETFs experienced net negative flows for the first time since their launch in early January. Every trading day witnessed a net negative flow, with total outflows from Grayscale’s GBTC exceeding $2 billion. However, after discounting the inflows from the newborn nine products, the net outflow for the week was $896 million.
Demand for the ETFs has reduced, as seen in the inflows plummeting from the high records of more than $1 billion per day.
Meanwhile, Bitfinex anticipates a period of ranging for BTC in the near term due to the reduction in ETF demand. The downturn is expected to be relatively moderate, and data from Monday shows that the flows have turned positive.
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