Last week, panic in the market over the German government and Mt. Gox creditors’ sell-off led to heavy downward pressure on the price of Bitcoin, breaking the price range of 120 days and falling to a low of $53,219.
However, according to analysts at Bitfinex, derivatives market indicators suggest that the price of Bitcoin may have begun to stabilize and that the asset may have reached a local low. According to The Block’s report, analysts at Bitfinex told the media that the gap between implied volatility and historical volatility has narrowed by nearly 90%, indicating that traders expect the price of Bitcoin to remain within a range and stabilize. On the other hand, although open interest contracts for options show a lack of confidence in both directions, the selling pressure from short-term holders may be nearing its end.
The Bitfinex analyst noted, “While we see long-term Bitcoin holders continue to realize significant profits in their spot positions, the selling pressure from short-term holders may be nearing its end. We have noticed that the short-term holders’ spent output profit ratio (SOPR) is 0.97, indicating that this group is currently selling at a loss. Historically, when this situation occurs, as the selling pressure eases, prices usually rebound.”
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