The market shows signs of a "capitulation sell-off"! K33 Research: Bitcoin's "phase bottom" may have already formed

Bitcoin briefly plummeted last Monday, approaching the $60,000 mark and triggering market panic. However, according to research firm K33, this sharp decline likely signals that a “phase bottom” has been established. K33 believes that whether in spot, ETF, or derivatives markets, signs of a “capitulation sell-off” are emerging.

K33 Research Director Vetle Lunde, in a report released on Tuesday, cited a series of “extreme abnormal data” to support this view. He pointed out that the market experienced its first fund rate collapse since the U.S. banking crisis in March 2023, and option skew levels only seen during the worst part of the 2022 bear market. Additionally, trading volume surged to the 95th percentile.

The firm also noted that momentum indicators have fallen to rare levels. Continuous selling since January 20 has caused Bitcoin’s daily Relative Strength Index (RSI) to drop to 15.9, the sixth-lowest oversold level since 2015, only surpassed by March 2020 and November 2018. RSI is mainly used to measure the speed and magnitude of price changes, fluctuating between 0 and 100.

Lunde pointed out that during the previous two instances when RSI was this low, it corresponded to cyclical bottoms, further reinforcing the idea that the recent decline may be forming a phase bottom.

Market sentiment has also collapsed. The Crypto Fear & Greed Index briefly fell to 6, the second-lowest level in history, nearly reaching a state of full panic, indicating that investor pessimism about Bitcoin dropping to $60,000 has reached an extreme.

Lunde stated that price volatility was accompanied by “unusually active trading.” He wrote that on February 6, Bitcoin spot trading volume reached $32 billion within two days, setting a new record, with trading volumes on February 5 and 6 reaching the 95th percentile. Such conditions have only occurred once before, during the FTX collapse.

Lunde analyzed that such extreme data often indicate that prices are hitting phase extremes, typically followed by consolidation and possibly testing local lows again.

Derivatives data also reflect extreme market panic. According to K33, on February 6, the daily funding rate for Bitcoin perpetual contracts suddenly dropped to -15.46%, the lowest since March 2023; the 7-day average funding rate also fell to -3.5%.

Furthermore, options market skewness entered an “extreme defensive zone,” with hedging sentiment comparable to during the LUNA collapse, Three Arrows Capital (3AC) liquidation, and FTX bankruptcy periods.

Regarding Bitcoin spot ETFs, BlackRock’s IBIT hit a record daily trading volume on February 5, surpassing $10 billion and trading 284.4 million shares. However, IBIT also recorded its fifth-largest daily net outflow since listing. Although funds flowed back in over the following days, since last Tuesday, IBIT’s net outflow has totaled 13,670 Bitcoins.

Combining multiple extreme data points—volatility, trading volume, returns, skewness, and ETF fund flows—Lunde stated that the probability of $60,000 serving as a phase bottom is very high.