Is Bitcoin's price ready to recover after a week of sharp decline?

Bitcoin just experienced one of the worst weekly declines in the past 12 months, and it could even be considered one of the worst weeks in history. The intense selling pressure pushed Bitcoin into a severely oversold state. However, this deep decline also raises questions among many investors: is this the right time to buy and wait for a recovery?

Is Bitcoin in an ideal buying zone?

Several factors suggest that Bitcoin’s current price may be in an attractive buying zone. One of these factors is the return of demand from major institutions. Specifically, Bitcoin ETF funds recorded outflows of $1.25 billion from Tuesday to Thursday.

Flow of capital into spot Bitcoin ETFs | Source: CoinGlassThe outflows from these ETF funds coincided with Bitcoin USD entering a strong downtrend. This indicates that ETF funds may have contributed to selling pressure. However, they might also be taking advantage of the discounted prices to buy back in.

In fact, Bitcoin ETF funds recorded inflows of $330.7 million on Friday, matching a strong recovery as Bitcoin USD rose over 12% on the same day.

Risks of Bitcoin price volatility due to increased leverage demand

Before the recent decline, many predictions suggested that Bitcoin could fall below $60,000. And indeed, these predictions came true last week.

However, this key level is now considered a strong support zone, with optimistic signals gradually returning to the market. This was clearly reflected in the large number of liquidation orders that occurred on Saturday morning.

After the plunge, Bitcoin’s price recovered and reached a high of $71,000 before dropping to $67,500 at present. This correction led to the liquidation of over $119 million worth of long Bitcoin orders.

Notably, short orders liquidated were even higher, totaling $273 million during the same period. This indicates that the market is experiencing a significant increase in leverage usage, despite the volatile week.

The sharp rise in long orders suggests some investors are expecting a quick recovery. Conversely, the large number of short orders liquidated in the past 24 hours indicates that many investors predicted incorrectly and expect the price to continue falling.

Although liquidation amounts remain high in the past 24 hours, they have decreased significantly from the weekly peak. On Thursday, total liquidation of Bitcoin long orders exceeded $1 billion, marking the second-largest liquidation event since October 10 last year.

Global interest in Bitcoin is increasing again

The last time Bitcoin experienced such a severe oversold condition was in 2022. Therefore, analysts expect demand to surge at deep discount levels like today. Especially, the recent decline has also significantly increased global attention on Bitcoin.

According to Google Trends data, worldwide searches for Bitcoin are rising sharply, reaching the highest level in the past 12 months. This indicates that investor interest worldwide is being rekindled.

Interest in Bitcoin over time | Source: Google TrendsThis increase is also reflected in the capital flowing into the spot Bitcoin market, with over $1 billion recorded on Friday, marking the highest daily inflow in 12 months. This explosive demand has driven a strong price rally during the same trading session, showing that most market participants are ready for a recovery.

However, capital from “whales” — large investors — has not shown signs of significant increase. This suggests that big investors are still on the sidelines and have not yet succumbed to the “fear of missing out” (FOMO) mentality.

Market sentiment remains filled with anxiety

Despite the notable recovery, the lack of capital from large investors could be a sign that a full recovery has not yet arrived. This reflects extreme fear dominating the market. The Bitcoin USD market sentiment index has now dropped to a record low.

Interestingly, liquidity flows in the past 24 hours still favor safe-haven assets like gold rather than Bitcoin. This indicates that investors are still prioritizing protecting their assets amid unpredictable volatility in the crypto market.

In the current context, the biggest question remains: can Bitcoin sustain its recovery and return to its highs, or will it continue to face hidden risks? Time will tell.