According to a recent report by asset manager ARK Invest, Bitcoin may be oversold, primarily due to actions taken by the German government. While this might seem concerning, it could indicate a potential upward correction.
Germany’s Quick Sell-Off
In June, the German government sold a massive 50,000 BTC. This huge sale caused Bitcoin’s price to drop significantly, from $70,000 to under $55,000. ARK Invest highlights this sell-off as a key factor in Bitcoin being oversold. They also use other indicators to support their view. According to ARK, “Based on realized profits/losses of short-term holders and miner outflows, Bitcoin appears oversold. The current levels of miner outflow suggest miners are capitulating, which could be a precursor to a bullish reversal.”
What Does “Oversold” Mean?
When we say Bitcoin is ‘oversold,’ it means the price has fallen too quickly in a short period. This often leads to the belief that the price is now too low and a rebound is likely. It’s similar to when a stock is oversold.
Want to check if a coin is oversold? You can use tools and charts on TradingView for example. The Relative Strength Index (RSI) is a great indicator. This is a momentum oscillator that measures the speed and change of price movements. It moves between zero and 100. Traditionally, RSI is considered overbought when above 70 and oversold when below 30. You can also look at Bollinger Bands, MACD, and Chaikin Money Flow for more insights.
Investors Still Interested in Bitcoin ETFs
Despite the recent drop in Bitcoin’s price, there’s good news. Investor interest in Bitcoin exchange-traded funds (ETFs) remains strong. ARK points out that the sharp decline in Bitcoin’s price hasn’t led to a significant outflow from Bitcoin ETFs. In fact, billions of dollars have flowed into these funds. For instance, BlackRock’s iShares Bitcoin Trust (IBIT) saw $107 million in inflows on July 18, following nine consecutive days of inflows.
Economic Factors and Mt. Gox Repayments
ARK Invest also notes that Bitcoin is influenced by global economic data. They mention that a weakening economy could impact Bitcoin’s price. Additionally, the repayment of approximately $9 billion in BTC to creditors of the bankrupt cryptocurrency exchange Mt. Gox could affect the market. Unlike Germany’s abrupt sale, these creditors might choose to hold their Bitcoin, potentially reducing the impact on the market.