Bitcoin Shows Mid-to-Late Bear Market Signs as Liquidity Dries Up, Bitfinex Says

Bitcoin is facing a liquidity squeeze as spot trading activity falls to its weakest level since early 2019, and U.S. spot Bitcoin ETFs record $385.2 million in weekly net outflows, according to Bitfinex Alpha.

Onchain activity is similarly subdued, with Bitcoin transfer velocity at a seven-year low. Bitfinex Alpha said the combination points to limited market participation even as conditions outside crypto have become more supportive.

Stablecoins offer another sign that fresh capital has yet to return. Their supply has contracted about 4.5% from its May peak, falling to $300.7 billion.

Against that backdrop, Bitfinex Alpha said Bitcoin was displaying characteristics typically associated with the middle-to-late stages of a bear market. The cryptocurrency remains between two key cost-basis levels: the long-term realized price at $52,699 and the short-term holder realized price at $67,176. 

A realized price median near $63,200 has held as support for the past two weeks. Losing that level could shift attention toward Bitcoin’s June low of $57,803, the report said.

Crypto’s weakness has persisted despite softer U.S. inflation data, easing financial conditions and record highs in equities.

Bitfinex Alpha said renewed growth in stablecoin supply and a return to net inflows for U.S. spot Bitcoin ETFs are the main indicators to watch for evidence that incremental liquidity is returning to the market.

Source: Bitfinex