Bitcoin hits year-to-date low... "Entering a capitulation zone, room for a short-term rebound"

Bitcoin (BTC) posted a year-to-date low, marking about a 40% correction from its all-time high. At the same time, heavy outflows from global Bitcoin exchange-traded products (ETPs) have continued, deepening broadly bearish sentiment across the market.

On the 2nd (local time), Bitcoin fell as low as $74,555 intraday, setting a new low for the year. Over the same period, global Bitcoin ETPs saw net outflows of about $1.3 billion last week alone. Based on all digital asset (cryptocurrency) ETPs, net outflows totaled $1.73 billion, extending large-scale withdrawals for a second consecutive week.

Asset manager Bitwise, in its weekly report, assessed that Bitcoin’s valuation has entered an "undervalued zone at the lowest level on record." According to Bitwise, the two-year moving market value-to-realized value (MVRV) z-score fell to an all-time low, a metric that in past cycles coincided with a 'fire-sale' phase.

Market sentiment has also contracted sharply. Bitwise’s crypto asset sentiment index fell to levels seen during the mass liquidation episode in October 2023, and only 2 of 15 tracked indicators were found to be above their short-term trend lines.

Still, some technical indicators are raising the possibility of a short-term rebound. Bitcoin’s daily relative strength index (RSI) has dropped to the 20–25 range, an area that in most cases since August 2023 was followed by rebounds of roughly around 10%.

In the spot market, buy signals are also being detected. Spot cumulative volume delta (CVD) on Binance and Coinbase has turned positive, suggesting an inflow of aggressive spot buying. Meanwhile, open interest (OI) is stagnant and funding rates remain in negative territory, supporting the view that this rebound attempt is being driven by spot demand rather than leverage.

The fact that last week’s liquidations of Bitcoin long positions exceeded $1.8 billion is also cited as evidence that additional downside pressure may be limited. In derivatives markets, around $3 billion worth of short-position liquidation orders are stacked near $85,000, fueling talk that upside volatility could expand on a short-term rebound.

Markets expect a volatile environment for the time being, as extremely bearish sentiment intersects with attempts at a technical rebound. Still, assessments suggest whether the medium-term trend turns will depend on a recovery in inflows and shifts in the macro environment.