BTC enters the deepest oversold drawdown since 2023

BTC has continued its drawdown, entering oversold territory not seen since the 2023 bear market. The current selling has been ongoing for 73 days since the recent all-time high. 

BTC is still trading with highly fearful sentiment, and has not staged a recovery despite the expectations for a year-end rally. The current market climate puts BTC at the most oversold level since the 2023 bear market. 

As of December 18, BTC traded at $86,948.17, with a dominance of 57.6%. The leading coin is just $10,000 above the yearly lows at around $76,000, raising comments that the market’s bullish momentum was wiped out in the latest crash.

The October 10 crash and liquidations have a lasting effect for over two months. Historically, BTC and crypto have taken at least three months to recover liquidity and speculative open interest. The recent slides below $90,000 further solidify the beliefs that BTC may take longer to recover for a new bull market. 

In the past months, BTC saw a mix of selling and re-accumulation to different wallets. Derivative trading sentiment remains fearful, with low enthusiasm for an imminent rally. BTC is pressured by ETF selling, while some traders are trying to protect their earnings from an eventual prolonged bear cycle. 

Can BTC reverse course? 

BTC has shown indications of becoming an oversold asset for the past two months. However, this was not enough to re-spark the price rally. 

The market is still vulnerable to liquidations, attacking long positions whenever there is more liquidity accumulated. 

There are also indicators of traders protecting from ongoing dips in the $80,000 range. BTC open interest is down to $27.4B, remaining at a six-month low. The drawdown continued since the yearly peak at over $44B as of October 6. 

Spot trading has also been insufficient to stop the slide. Episodes of rapid selling have also shown their ability to stop any attempts at breakout rallies. As Cryptopolitan reported, BTC recovered to $90,000, only to crash to $85,000 in minutes. Additional Glassnode data shows holders are still distributing their BTC holdings.

Based on options market positioning, traders may become more bullish above $90,000. At prices below that, traders opened more put options to protect from further downside.

BTC shows signs of local bottom

Based on the current metrics, BTC is showing signs of reaching a local low for its price. However, the markets are anticipating more dips, with downside protection for a slide under $80,000. 

BTC is setting expectations for ending December in the red, while logging a net yearly loss. 

Only around 64% of the BTC supply is in profit, once again sinking to levels not seen since 2023. For now, whales have realized enough gains, but BTC may see further selling at other capitulation levels. 

The net unrealized profit and loss still shows there are multiple wallets in profit even at thee $86,000 price range. The metric may indicate that there are still confident holders. On the other hand, an ongoing price weakness may mean the BTC capitulation is not over.

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