Bitcoin’s current derivatives and positioning regime closely resemble late-2022 bear market conditions, typically followed by prolonged consolidation rather than immediate recovery, according to K33.
Bitcoin's
BTC-1.09%
current market structure closely resembles the late stages of the 2022 bear market, with derivatives positioning, exchange-traded fund flows, and macro indicators signaling a prolonged consolidation phase rather than an imminent breakout, according to research and brokerage firm K33
In a new report late Tuesday, K33 Head of Research Vetle Lunde said its proprietary regime indicator, which incorporates derivatives yields, open interest, ETF flows, and macro inputs such as the U.S. yield curve, shows "strikingly strong similarities" to periods in September and November 2022 — both near the global bottom of that downturn.
However, while those historical regimes marked market lows, they were followed by extended stretches of sluggish price action, producing muted forward returns and lengthy consolidation periods, Lunde noted.
Bitcoin has already fallen sharply from recent highs, shedding nearly 28% since January, while broader derivatives signals show defensive positioning, according to K33. Funding rates have remained negative for more than 11 consecutive days, and notional open interest fell below 260,000 BTC, reflecting investors unwinding long positions, Lunde said. This positioning, combined with declining leverage, suggests a low near-term risk of derivatives-driven squeezes, he added.
Consolidation rather than immediate recovery
K33 said its model assigns the greatest weight to derivatives data, which reflects real-time demand for hedging or upside exposure. Negative yields signal excess hedging demand, while falling open interest indicates traders exiting positions rather than building new directional bets. The current regime, Lunde said, aligns with environments historically associated with market bottoms but not rapid recoveries.
The firm noted that similar historical regimes delivered average 90-day returns of roughly 3% in strongly similar environments and slightly negative returns in moderately similar ones, underscoring the likelihood of slow, discouraging consolidation. Lunde expects bitcoin to trade between $60,000 and $75,000 for a prolonged duration, describing current entry levels as attractive while emphasizing the need for patience.
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Market activity has cooled significantly following recent sell-offs. Bitcoin spot trading volumes dropped 59% week over week, while futures open interest declined to four-month lows — behavior consistent with markets absorbing losses and stabilizing after major drawdowns, the firm noted. Volatility has begun to normalize as prices stabilized, further supporting expectations for a quieter trading environment, Lunde said.
Institutional positioning also reflects similar caution, according to the report.
Institutional traders on CME have remained largely inactive, with muted yields and shallow open interest reflecting limited directional conviction. Meanwhile, bitcoin exchange-traded products have seen a record drawdown of 103,113 BTC from peak holdings since October, though roughly 93% of peak exposure remains intact despite bitcoin retracing nearly 50% over the same period. This suggests institutional investors have reduced exposure but largely maintained positions through the downturn, Lunde said.
Meanwhile, sentiment indicators highlight extreme pessimism but offer limited predictive value, in the analyst's view. The Crypto Fear and Greed Index recently hit an all-time low of 5, reflecting widespread fear, though he noted that such readings historically have not reliably signaled strong rebounds.
Buying bitcoin during extreme fear has produced average 90-day returns of just 2.4%, compared with 95% when buying during extreme greed, underscoring that extreme fear does not reliably signal strong rebounds, Lunde said.
K33 concluded that bitcoin's current market regime shares key characteristics with late bear market environments, suggesting downside risks may be limited, but recovery could take time, echoing the drawn-out stabilization phase that followed the 2022 bottom.
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