Decoding Bitcoin’s $60,000 Dip: K33 Research Points to a ‘Capitulation Bottom’

Bitcoin’s dramatic descent last week, briefly touching the $60,000 threshold, sent ripples of apprehension across the cryptocurrency market. Yet, amidst the widespread fear, leading research firm K33 suggests this sharp correction may not be a sign of further collapse, but rather a definitive ‘cyclical bottom’ – a period characterized by capitulation-like selling across spot, ETF, and derivatives markets.

In a compelling report released on Tuesday, K33’s Head of Research, Vetle Lunde, meticulously detailed a series of ‘extremely unusual data points’ that collectively paint a picture of market capitulation. These indicators, Lunde argues, are typically observed during the most severe downturns, signaling a potential inflection point rather than continued freefall.

Among the most striking data points is Bitcoin’s daily Relative Strength Index (RSI). Following a sustained selling period since January 20th, the RSI plummeted to an exceptionally low 15.9. This marks the sixth lowest oversold level recorded since 2015, with only the March 2020 crash and November 2018 bear market registering lower. Historically, such extreme RSI readings have consistently coincided with significant cyclical bottoms, lending substantial weight to K33’s current assessment.

Compounding the technical signals, market sentiment reached near-panic levels. The widely-followed Crypto Fear & Greed Index briefly dipped to a staggering 6 – its second-lowest historical reading. This extreme level of fear underscores the profound pessimism that gripped investors as Bitcoin approached the $60,000 mark, often a precursor to market reversals.

Despite the price volatility, trading activity surged to extraordinary levels. Lunde highlighted that on February 6th, Bitcoin’s spot trading volume soared to a record-breaking $32 billion over two days. Crucially, trading volume on both February 5th and 6th hit the 95th percentile – a phenomenon previously witnessed only once, during the chaotic aftermath of the FTX collapse. This ‘abnormally active trading’ during a sharp decline often signifies a flushing out of weak hands and a potential absorption by stronger buyers.

The derivatives market echoed this extreme distress. K33 data revealed that on February 6th, the daily annualized funding rate for Bitcoin perpetual contracts plunged to -15.46%, marking its lowest point since March 2023. The 7-day average funding rate also dropped to -3.5%. Furthermore, the option market’s skew entered an ‘extremely defensive zone,’ reflecting a level of hedging sentiment comparable to the LUNA collapse, the Three Arrows Capital (3AC) liquidation, and the FTX bankruptcy – all periods of profound market uncertainty.

Even the relatively new Bitcoin spot ETF market showed complex signals. BlackRock’s IBIT ETF recorded a new single-day trading volume record on February 5th, surpassing $10 billion with 284.4 million shares traded. However, IBIT also experienced its fifth-largest single-day net outflow since its inception. While subsequent days saw some capital return, the ETF recorded a cumulative net outflow of 13,670 Bitcoins since the previous Tuesday, indicating a mixed sentiment among institutional players.

Synthesizing these myriad extreme data points – from volatility and trading volume to funding rates, option skew, and ETF flows – Vetle Lunde concludes that the probability of $60,000 serving as a significant cyclical bottom is exceptionally high. K33 anticipates that Bitcoin will now enter a ‘consolidation period’ lasting several weeks to potentially months, with price action expected to oscillate between $60,000 and $75,000. While market activity may temper and retests of support levels are possible, the firm does not foresee a breach of the recently established low.