'The Worst Is Behind Us': Bitcoin Market Conditions Mirror FTX Bottom, Analysts Say

In brief

• A bottom may be forming for Bitcoin amid its monthslong rout, K33 analysts said.
• Technical indicators have paralleled the collapse of FTX, they wrote.
• The market’s defensive posture is “atypical,” K33’s Vetle Lunde said.

Bitcoin has come under significant pressure in recent months, but there are signs that a bottom may be forming for the digital asset despite a backdrop of geopolitical instability, according to analysts at crypto research and brokerage firm K33. As the U.S.-Israel war on Iran raged on for a fifth day, the analysts wrote in a Wednesday note that Bitcoin is showing signs of relative stability, leading them to determine that the most intense period of selling pressure has likely passed amid Bitcoin’s months-long swoon. “The worst is behind us; now we wait,” they wrote. “However, bottoming regimes in BTC have typically been slow, and patience has been a necessary virtue.” 

Bitcoin recently changed hands around $73,036, a more than 7% increase over the past day, according to CoinGecko. It remained 42% down from its all-time high of $126,000 in October. K33 Head of Research Vetle Lunde cited technical indicators including Bitcoin’s weekly relative strength index, or RSI, which fell to 26.84 last week, its lowest level since July 2022. The indicator serves as a gauge for Bitcoin’s momentum based on the speed and magnitude of price changes, mirroring oversold conditions that emerged during a series of blowups among crypto lenders that year. Those failures preceded the collapse of crypto exchange FTX, which marked the bottom for Bitcoin’s route in 2022. As Bitcoin has fallen in recent weeks, Velte noted that Bitcoin posted back-to-back days where trading volumes exceeded 95% of those on record. During bear markets, that has only happened once: when FTX filed for bankruptcy. Beyond that, Lunde pointed to derivatives, where market participants have been “willing to pay a chunky premium for bearish bets” to protect against further price drops in perpetual futures markets that maintain price alignment with Bitcoin through periodic payments.

With regards to options, Lunde noted that so-called skews—which compare the cost of bearish “puts” versus bullish “calls”—jumped to levels only witnessed during the most catastrophic market collapses of 2022, including the fall of FTX and the Terra crash. Lunde described “extreme impulses of market stress” as an encouraging sign for bottoms to form. K33’s report acknowledged that no indicator is foolproof, but history suggested “an overwhelming concentration of bets in one direction for BTC tends to be followed by BTC moving in exactly the opposite direction.” Lunde echoed that sentiment in an interview with Decrypt, but he described the latest sell-off as relatively orderly compared to the chaos that rattled crypto prices years ago. Nonetheless, he viewed the defensive position in the crypto market as “atypical.” “It is something that, in the past, has been associated with global bottoms,” Lunde told Decrypt. “Bitcoin has a tendency to do the unexpected.”