Recovery Underway After Drop to $82,000 as Selling Pressure Decreases

TLDR

Bitcoin recovered after dropping near $82,000 on Friday, with analysts seeing reduced selling pressure and increased Federal Reserve rate cut expectations
Spot bitcoin ETFs recorded $1.22 billion in outflows last week, extending losses to four consecutive weeks
Bitcoin open interest fell by 1.3 million BTC in 30 days, the sharpest decline of this cycle
Federal Reserve rate cut probability for December rose from 30% to 70% in two days
Analysts expect Bitcoin to consolidate between $85,000 and $90,000 as the market structure remains fragile

Bitcoin moved higher over the weekend after reaching lows above $82,000 on Friday. The cryptocurrency fell to $80,600 on Coinbase, marking its lowest level since mid-April.

The decline represented a 36% correction from Bitcoin’s all-time high above $126,000 reached in early October. Bitcoin has dropped 20% over the past month alone.

Analysts from wealth manager Swissblock stated that Bitcoin has taken its first real step toward forming a bottom. The firm’s Risk-Off Signal dropped sharply, indicating that selling pressure has eased.

“The worst of the capitulation is likely behind us, for now,” Swissblock analysts wrote. They noted that this week is critical to see if selling pressure continues to fade.

The analysts warned that a second selling wave often occurs after an initial decline. This second wave is typically weaker than the first and holds above previous lows.

Federal Reserve Rate Cut Expectations Shift

Charles Edwards, founder of Capriole Fund, explained that tech stocks and crypto markets declined over the past two weeks due to changing rate cut expectations. The probability of a Federal Reserve rate cut in December initially fell to around 30% last week.

That probability has now returned to 70% according to Edwards. The CME Fed Watch Tool currently shows 69.3% odds of a 0.25 basis point cut at the December 10 meeting.

Market research account Global Markets Investor noted that expectations changed drastically in just two days. Polymarket predictions flipped back toward a 70% chance of a rate cut.

Some analysts expect the Federal Reserve to announce liquidity expansion measures at the next meeting. Market analyst Sykodelic suggested the central bank must inject liquidity to avoid bankruptcy.

Interest rate cuts and increased liquidity typically benefit high-risk assets like cryptocurrencies. Previous periods of quantitative easing have been followed by major rallies.

Bitcoin ETF Outflows Continue

U.S. spot bitcoin exchange-traded funds recorded $1.22 billion in net outflows last week. This marked the fourth consecutive week of negative flows, bringing four-week cumulative outflows to $4.34 billion.

BlackRock’s IBIT experienced $1.09 billion in outflows for the week. This represented its second-largest weekly outflow on record, behind $1.17 billion logged in late February.

The ETF outflows coincided with the largest crypto market correction of this cycle. Vincent Liu, CIO at Kronos Research, expects Bitcoin to consolidate between $85,000 and $90,000.

Liu noted that liquidity remains shallow and stops are being picked off. Spot Ethereum ETFs saw $500.25 million in weekly net outflows, marking their third straight week of losses.

Open Interest Decline Signals Potential Bottom

Bitcoin open interest fell by approximately 1.3 million BTC over the past 30 days. Analyst Darkfost called this the sharpest 30-day drop of the current cycle.

The open interest decline currently equals $114 billion with Bitcoin trading at $87,500. Darkfost explained that falling prices continue to trigger liquidations, pushing traders to adjust their strategies.

Investors appear to be pausing futures trading to reduce risk exposure. The analyst stated that these cleansing phases are often essential to forming a solid bottom.

The last time Bitcoin open interest fell this quickly was during the 2022 bear market. Darkfost emphasized how this highlights the scale of the current cleanup.

Crypto analyst Michaël van de Poppe stated this week will be decisive for Bitcoin’s price. He said if Bitcoin can surge back and stay between $90,000 and $96,000, chances of a new all-time high increase substantially.

Bitcoin is currently trading at $87,348, up 1.2% over the past 24 hours.