According to Cointelegraph: Bitcoin’s nearly 10% decline last week is being viewed as a “healthy realignment,” reducing the likelihood of sudden downside volatility, according to a report by analysts at Bitfinex. This drop, which brought Bitcoin’s price down to the $60,000 support zone, was seen as a positive adjustment that could stabilize the market, despite the sharp fall from its recent high of $66,600 on Sept. 27.
Bitcoin’s Recent Decline: A Necessary Correction
Between Sept. 27 and Oct. 4, Bitcoin experienced a significant 9.94% dip, attributed to several factors, including escalating geopolitical tensions in the Middle East and growing concerns about the United States economy. These developments cooled investor risk appetite, resulting in a correction in Bitcoin’s price and signaling a "cautious sentiment" among spot investors at higher price levels.
The Bitfinex report, released on Oct. 6, noted that this dip helped reduce open interest in Bitcoin from $35 billion to a more stabilized $31.8 billion, indicating a healthier market alignment. Additionally, more than $450 million in long positions were liquidated during the downturn, highlighting the market’s long-biased positioning.
Lower Volatility Ahead?
Bitfinex analysts believe that this correction has lowered the risk of sudden volatility in the coming days and weeks. The dip, which saw the first four consecutive red days for Bitcoin since early August, has encouraged a consolidation of spot buying at lower prices. This suggests that buyers may see the current price levels as an opportunity to accumulate more Bitcoin.
The report emphasized that the substantial amount of liquidations relative to the price decline underscores the leveraged positioning in the crypto market, particularly as Bitcoin broke through the psychological $65,000 level. The market bias continues to be toward capturing the upside, as investors expect more favorable conditions ahead.
Positive Sentiment for Risk Assets
Despite the recent dip, the report highlighted some optimistic factors that have buoyed the market. Positive U.S. labor data in September and October has supported broader optimism, and with expectations of the Federal Reserve cutting interest rates again in November, the appetite for risk assets like Bitcoin could return.
As of now, Bitcoin has rebounded to $62,650, signaling the return of aggressive spot buying. However, Bitfinex analysts cautioned against making definitive conclusions about the short-term direction, noting that the market remains highly reactionary.
The report suggests that future clues for Bitcoin’s market direction may emerge from early-week trading sessions in the U.S., as investors remain highly attuned to macroeconomic and geopolitical developments. For now, Bitcoin's recent dip is seen as a healthy correction, reducing downside risk and setting the stage for a potential recovery as broader market conditions stabilize.
