Ever since the significant sell-off experienced in early August, Bitcoin [BTC] has struggled to mount a strong, sustained recovery. Following that sharp drop, the attempt at a relief rally towards $65,000 quickly retreated, signaling a shift to risk-off sentiment among investors and traders.
Nevertheless, even after the recent dip to $52,500, there is a possibility that Bitcoin could be nearing a local bottom. Market analyst Marty Party suggests that BTC might find support as Bitfinex long positions continue to rise, indicating a potential reversal.
“Bitfinex Longs continue to grow – historically, this predicts the bottom of #Bitcoin more than any other indicator.”
Is it Wise to Capitalize on the Decline?
According to the analyst, the surge in Bitfinex’s BTC long positions that began on August 28th could imply an imminent rebound for the cryptocurrency. CryptoCrypto’s assessment of Bitfinex’s BTC long positions and price movements has also revealed positive correlations with recent market bottoms.
Examining the chart provided, it becomes apparent that BTC’s bottoms in both April and July coincided with notable increases in long positions on the Bitfinex exchange. On average, BTC hit a bottom approximately 15 days after the uptrend in long positions. The market’s behavior in September will determine whether this pattern persists.
It is important to note that correlation does not necessarily imply causation. While rising long positions on Bitfinex may signal a potential turnaround for BTC, other factors such as macroeconomic developments or specific crypto-related news could also influence Bitcoin’s recovery.
Despite other factors at play, the Mayer Multiple indicates that BTC’s current price levels may be undervalued, potentially offering traders an attractive buying opportunity. The Mayer Multiple compares BTC’s price against the 200-day Moving Average, providing insights into its relative valuation.
Historically, a Mayer Multiple value below 2.4 has signaled undervaluation and favorable buying conditions, whereas values exceeding 2.4 suggest an overheated market. Readings below 1 (green) have coincided with local bottoms in July and early August, echoing the signal observed when Bitfinex long positions surged in late August. This suggests that Bitcoin could be significantly undervalued at its present price.
Furthermore, the prevailing extreme fear in the market, indicated by a Crypto Greed and Fear Index reading of 23, could serve as an additional indication to investors to consider purchasing discounted BTC.