K33: Bitcoin Enters Third-Deepest Oversold Zone in History — 'The Worst Is Behind Us'

Bitcoin Plunges Into Historic Oversold Territory

After five consecutive months of decline — one of the longest losing streaks on record — bitcoin's weekly RSI has dropped to 26.84. K33 head of research Vetle Lunde highlighted that such extreme readings have occurred only a handful of times throughout BTC's entire trading history.

According to the analytics firm, the primary selling pressure in recent months came from long-term holders and institutional investors. The fourth quarter saw several notable developments:

• A sharp decline in the supply of coins aged six months or older;
• ETFs shedding nearly 100,000 BTC;
• Open interest in CME futures falling to two-year lows.

However, Lunde noted that the pace of outflows has started to decelerate.

Why This Matters

Extreme RSI oversold conditions have historically signaled proximity to market bottoms. When institutional investors and large holders stop aggressively selling, the market gains a foothold for stabilization and potential recovery. The current situation carries additional weight as it unfolds against a backdrop of geopolitical turmoil — the escalating Middle East conflict that has rattled equity markets and sent energy prices soaring.

Derivatives Signal Peak Bearishness

K33 analysts identified the derivatives market as one of the most telling indicators of current sentiment. The 30-day average funding rate on bitcoin perpetual futures recently turned negative — only the tenth such occurrence since 2018. Negative funding rates indicate that traders are aggressively closing long positions or opening shorts, pushing perpetual contracts to trade at a discount to spot prices.

A similar pattern has emerged in the options market, where traders are actively buying downside protection and paying significant premiums for bearish bets, according to Lunde.

Yet historical precedent offers grounds for optimism. Following previous episodes of deeply negative funding, bitcoin's average 30-day return was approximately 13% (with a 56% success rate), the 90-day return averaged 62% (78% success rate), and the six-month return reached a mean of 101% with the same 78% probability of a positive outcome.

Resilience Amid Geopolitical Shock

Despite the defensive positioning across derivatives markets, bitcoin showed notable resilience as the Middle East conflict escalated. Following strikes by the U.S. and Israel on Iran and retaliatory actions, oil and gas prices surged while equity markets fell. Bitcoin, meanwhile, posted a modest gain.

Lunde attributed this dynamic to the extensive risk reduction that had already taken place in prior months. Institutional players on CME cut their exposure by roughly a third, while ETF investors withdrew approximately 90,000 BTC over the past five months. At the same time, selling pressure from long-term holders is easing — the supply of coins older than six months is beginning to grow again.

BTC/USDT hourly chart on Binance. Source: TradingView

Consolidation at a Key Technical Level

Bitcoin is currently consolidating near its 200-week moving average — a level that has historically coincided with market bottoms. At the time of the original report, the asset was trading around $71,600, having jumped 6.7% over the preceding 24 hours.

Lunde concluded that the worst is behind us and that K33 sees no reason to sell bitcoin at current levels.

Earlier in March, VanEck CEO Jan van Eck similarly stated that bitcoin's price had approached a local bottom, adding that the four-year halving cycle continues to drive price action.