Bitfinex says bitcoin prices may have bottomed and are beginning to stabilize

The Block2024/07/09 14:25

By:Brian McGleenon

A local bottom has been potentially reached for bitcoin, and the derivatives market indicates that the digital asset’s price is beginning to stabilize, according to Bitfinex analysts.Bitcoin’s price has traded flat over the past 24 hours, holding above the $57,000 mark, according to The Block’s Price Page.

Derivatives market indicators suggest that bitcoin prices are stabilizing after the heightened price fluctuations of the past seven days, analysts said.

Last Wednesday, bitcoin prices dropped below their 120-day range, reaching a local low of $53,219, as the market reacted to fears of selling by both the German government and Mt. Gox creditors . Since then, the largest digital asset by market capitalization has climbed back above the $57,000 mark, but not without a spike in daily price volatility.

However, according to Bitfinex analysts derivatives market indicators show that bitcoin's price could be stabilizing and that the asset may have reached a local bottom. "Derivatives market data suggests that a potential local bottom has been reached for bitcoin," Bitfinex analysts told The Block.

Bitcoin price fluctuations decreasing

The Bitfinex analysts said that price fluctuations have begun to decrease, as "the spread between implied and historical volatility has narrowed by nearly 90%, which suggests that traders expect bitcoin prices to stay in a range and stabilize."

The analysts noted that while options open interest indicates a lack of conviction in either direction — with short-term shorts flushed out by Tuesday's slight uptick in prices — long-term holders are continuing to realize profits.

"While we do see long-term bitcoin holders continuing to realize significant profits on their spot holdings, short-term holder selling might be close to exhaustion, and we note that the Spent Output Profit Ratio (SOPR) for short-term holders is at 0.97, indicating that this cohort is now selling at a loss, when this has happened in the past prices have rebounded as selling pressure eased," Bitfinex analysts added.

Citi Bank forecasts eight Fed rate cuts over the next year

On Friday, Fortune reported that analysts at Citi Bank cited deflationary data in their forecast that the U.S. Federal Reserve could trim rates by 25 basis points eight times in a rate-cutting cycle starting in September and extending to July 2025.

The analyst note reportedly added that eight rate cut moves would lower the benchmark rate by 200 basis points, from the current 5.25%-5.5% range to 3.25%-3.5%. "A continued softening of activity will provoke cuts at each of the subsequent seven Fed meetings, in our base case," Citi predicted.

The analysts also pointed to signs of weakness in the latest U.S. jobs report . June saw a decline of 49,000 temporary services jobs, which Citi reportedly said was "the type of decline that is typically seen around recessions as employers begin reducing labor with the least strongly attached workers."

Deflationary data and dovish comments from Fed Chair Jerome Powell at a European Central Bank (ECB) event last week suggest the first rate cut will likely come in September. Also, according to the Chicago Mercantile Exchange (CME) FedWatch tool , interest rate traders have notched up the chances of a rate cut in September from 71% at the end of last week to 73.6%.

Bitcoin BTC +1.57% is now changing hands for $57,481 at 8:22 a.m. ET., according to The Block's Bitcoin Price Page .

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.