In the aftermath of a significant sell-off in June, Bitcoin appears to have possibly hit a local low, as per a recent analysis by experts at the Bitfinex exchange. The Bitcoin price plunged below the 120-day range on July 3, dropping to a low of $53,219 amidst rising concerns linked to Mt. Gox’s creditor repayments and other related issues. Analysts from Bitfinex indicated on July 8 that Bitcoin may have found a local bottom based on weekend market data, despite the pending distribution of a substantial amount of BTC by Mt. Gox. The sell-off in BTC was partly instigated by the German law enforcement agency, Bundeskrimanalamt (BKA), which initiated Bitcoin sales on exchanges, leading to significant selling activity from various investor groups. Bitfinex highlighted multiple reasons suggesting that Bitcoin's downward trend may soon cease.

U.S. and Germany Only Sold 4% of BTC Traded Since 2023

One rationale provided is that although the German government transferred a considerable nominal value of BTC to exchanges, in comparison to the overall Bitcoin traded since 2023, the amount is relatively small. The total realized capitalization of Bitcoin traded since 2023 stands at $224 billion. Governing bodies, including the United States and Germany, only sold $9 billion worth of seized Bitcoin, which constitutes merely 4% of the cumulative realized value since 2023. Despite the high nominal value, the actual volume of Bitcoins transferred to exchanges is relatively modest, indicating minimal market impact and supply overhang from seized government Bitcoin.

Low SOPR and Negative Funding Rates Suggest Market Bottom

Another factor hinting at a potential bounce in Bitcoin's price is the decline in the spent output profit ratio (SOPR) combined with negative funding rates. SOPR is a financial indicator that measures the realized profit or loss on a given day for specific groups of investors. Bitfinex's research revealed that the SOPR for short-term holders was 0.97 as of July 6, indicating that short-term investors are not selling at a loss. The average funding rate across all BTC perpetual trading pairs has also turned negative for the first time since the May 1 bottom. Historically, periods of negative funding rates alongside low short-term SOPR values have often signified the bottom of price corrections. The alignment of an oversold market condition with a recovering SOPR frequently indicates that the market is stabilizing.

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