Bitfinex Highlights "Seller Exhaustion" as Bitcoin Eyes a Potential Relief Rally

Bitcoin experienced a significant rebound this week, with its price rising nearly 8% in just one day. Analysts have noted indicators that suggest a possible local bottom may have already formed.

Key Takeaways:

Bitcoin's Recovery: Bitcoin saw a sharp increase of nearly 8%, leading analysts to consider the possibility of a local bottom.
Market Insights from Bitfinex: The exchange highlighted “seller exhaustion” following a $19 billion flush of leveraged positions, which has notably reduced market risk.
Diverging Opinions on Market Cycle: There are differing views on the current market cycle, with some analysts suggesting that this trend may not adhere to the traditional four-year patterns we've seen in the past.

In a statement released on Tuesday, Bitfinex indicated that the market is exhibiting signs of “seller exhaustion” after a significant period of deleveraging and panic selling by short-term traders.

The firm stated, “The combination of extreme deleveraging, capitulation among short-term holders, and early signs of seller exhaustion has created the conditions for a stabilization phase and a relief bounce.”

Bitfinex Highlights "Seller Exhaustion" as Bitcoin Eyes a Potential Relief Rally

Bitcoin Surges Toward $94K After Significant Leverage Flush

The remarks from Bitfinex came just before a rally on Wednesday, which momentarily pushed Bitcoin's price up to around $94,000. At the time of writing, the cryptocurrency was trading near $91,440, according to CoinMarketCap.

Bitfinex also noted that the market is now operating with a “leaner leverage base,” which lowers the risk of substantial liquidations occurring. This change comes after a sharp correction in October, where approximately $19 billion was removed from the market due to what traders described as an overleveraged situation.

This downturn led to Bitcoin falling to around $82,000 by late November. With the excess risk eliminated, Bitfinex suggests that the remaining leverage is now more manageable, thereby reducing price pressure and potentially paving the way for a more stable consolidation phase.

The late-year upswing has also sparked discussions about whether Bitcoin's well-known four-year cycle is becoming less relevant. According to traditional models, the cycle's peak may have already occurred in October when prices reached record highs of approximately $125,100.

However, the recent price rebound complicates this narrative, leading some market observers to argue that the current cycle might exhibit different characteristics compared to previous ones. Seasonal patterns provide little clarity; historically, December has been one of Bitcoin's quieter months, recording an average gain of 4.69% since 2013, based on data from CoinGlass.

This year, however, has deviated from the norm. November, typically a strong month for Bitcoin, ended with a steep decline of over 17%.

Several analysts maintain an optimistic outlook. Market commentator PlanC expressed on X that “this Bitcoin cycle is NOT like past cycles," while trader Quinten Francois suggested the digital asset is now “closer to the bottom than to the top.”

ARK Invest's Cathie Wood Foresees a Liquidity Rebound for Crypto

As previously reported, Cathie Wood, CEO of ARK Invest, has predicted that the liquidity crunch affecting both the crypto and AI markets will reverse in the coming weeks, driven by three anticipated policy changes from the Federal Reserve before the end of the year.

During this downturn, her firm has been actively acquiring crypto equities, investing over $93 million in a single day this week in undervalued digital asset stocks.

During ARK's November market webinar, Wood identified three temporary liquidity pressures that she expects to diminish rapidly due to Federal Reserve action and the resumption of government spending.

She predicts that the Federal Reserve will conclude its quantitative tightening measures at its meeting on December 10, which would alleviate one significant source of tension in the markets. Additionally, the recent conclusion of the government shutdown, which had led to a buildup in the Treasury General Account, has returned those funds to circulation.

By keeping track of these developments, investors can better navigate the complexities of the cryptocurrency market and make informed decisions.