According to a report by asset manager ARK Invest released on July 18, Bitcoin became oversold in June due to Germany’s government initiating a multibillion-dollar sell-off of 50,000 BTC seized in a 2020 police sting against Movie2k, a streaming platform for pirated content.
This sell-off caused Bitcoin prices to plummet from highs exceeding $70,000 in early June to a low of less than $55,000 during a brief dip in July.
“Based on short-term-holder realized profits/losses and miner outflows, Bitcoin appears oversold,” the report stated.
The report, which focuses on the period through June 30 but includes more recent data, added, “Current levels [of miner outflows] suggest that miners are capitulating, a harbinger of a bullish reversal.”
Another bullish signal identified by ARK is investors’ sustained appetite for BTC exchange-traded funds (ETFs).
The report highlighted that BTC’s sharp sell-off did not trigger a mass exodus from spot BTC ETFs.
By June 30, the drop in BTC’s spot price had overshot the 30-day percent change in BTC ETF flows by 17.3%.
July saw billions of dollars of net inflows into BTC ETFs, with about $1.35 billion entering the funds in the week ending July 15, according to CoinShares.
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BlackRock’s iShares Bitcoin Trust (IBIT) recorded $107 million in inflows on July 18 after nine straight days of inflows, according to Thomas Fahrer, co-founder of the crypto data platform Apollo.
Despite these positive signals, there are risks to BTC’s continued strong performance from global economic data.
ARK noted that corporate profits are steadily falling as pricing power diminishes, indicating economic weakness.
Bitcoin prices also face potential challenges from the defunct cryptocurrency exchange Mt. Gox’s repayment of approximately $9 billion in BTC to creditors.
However, unlike Germany’s abrupt sell-off, industry analysts believe that creditors may opt to hold onto their BTC, which could soften any potential negative impact on the broader market.
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