Bitcoins’ near 10% plummet last week was a “healthy realignment” that should lower the risk of it suddenly dropping in the coming days and weeks, say analysts from crypto exchange Bitfinex.
In an Oct. 6 report, Bitfinex analysts said the price of Bitcoin (BTC) stumbling down to the $60,000 support zone along with several other critical technical factors was a strong indicator of lowered volatility.
Bitcoin rallied to $66,600 on Sept. 27. Still, market optimism waned quickly as escalating geopolitical tensions in the Middle East and concerns about the strength of the United States economy snuffed out the risk appetite.
Bitcoin fell 9.94% from its peak to trough between Sept. 27 and Oct. 4, indicating a “cautious sentiment” among spot investors at higher price levels.
Bitcoin’s higher high is a strong indicator of muted downside volatility. Source: Bitfinex
Bitfinex analysts speculated that buyers could still look to consolidate more significant amounts of Bitcoin at lower prices.
“As Bitcoin experienced its first consecutive series of four red days since early August, the market saw a healthy realignment.”
The resulting dip saw open interest in Bitcoin shrink from $35 billion to a more “stabilized” $31.8 billion, Bitfinex said.
Additionally, on Oct. 1, over $450 million worth of long positions were liquidated during the dip, showing that the market is largely biased toward capturing the upside.
“This amount of liquidations being substantially large relative to the price decline is indicative of the long-biased leveraged positioning in the crypto market as we moved past the important technical and psychological level of $65,000,” the analysts wrote.
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The report said the market had been largely buoyed by positive US labor data in September and October. It added that broader optimism for risk should return, with the Federal Reserve expected to cut interest rates again in November.
Looking forward, the report said the recent move to the upside, which has seen Bitcoin rebound to $62,650, has seen the return of “spot buying aggression.”
Still, the analysts noted it’s too soon to make any “definitive conclusions” about short-term market direction.
“As the market remains reactionary, clues for future direction for BTC and the market, in general, may lie in any positioning seen in early-week trading sessions, particularly in the US,” the report said.
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