The cryptocurrency market may finally be catching its breath. According to a new analysis highlighted by ForkLog, Bitfinex researchers argue that the selloff and forced deleveraging of recent weeks have pushed crypto into the early stages of a stabilization phase. Their thesis: short-term holders have largely capitulated, leverage has been reduced, and on-chain indicators such as SOPR have flashed bottom-forming behavior. During the late-November washout, the key SOPR metric (which tracks whether coins are being spent at a profit or loss) dipped below 1 for only the third time in the past 25 months—an event previously associated with cyclical inflection points.
Bitfinex’s own weekly “Alpha” note echoes the view that a tradable bottom is approaching, while cautioning that price may remain choppy as the market rebuilds confidence. The report points to a 35% drawdown from the cycle high and a brisk rebound attempt, consistent with a transition from panic to consolidation rather than a straight-line recovery.
One reason for the calmer tone: derivatives risk has been dialed down. Total bitcoin futures open interest (OI) has slid dramatically from the early-October peak near $94 billion. Mid-November snapshots showed OI closer to the mid-$60 billions, and as of this week, CoinGlass dashboards show roughly $59–60 billion—evidence that speculative leverage has been flushed from the system. Cleaner positioning usually dampens volatility and sets the stage for more durable trend building.
Price action remains fragile, however. On December 1, bitcoin dropped to the mid-$80,000s—its steepest monthly decline since 2021—before stabilizing. That slide reflected broader risk-off sentiment across assets rather than crypto-specific news, underscoring how macro currents still matter.
At the same time, there are fresh green shoots on the institutional side. CoinShares’ latest weekly report shows digital-asset investment products swung back to $1.07 billion of net inflows after four straight weeks of outflows totaling $5.7 billion. Bitcoin, ether and XRP all saw strong demand, suggesting investors used the drawdown to rebuild exposure. Flows rarely mark exact bottoms, but a turn from persistent outflows to inflows is consistent with stabilization, not capitulation.
There are also targeted signals of growing comfort with bitcoin among large allocators. CoinDesk reports BlackRock’s Strategic Income Opportunities (SIO) fund increased its position in the firm’s spot bitcoin ETF (IBIT) by 14% in its latest filing, to 2.39 million shares. While modest in the context of BlackRock’s multi-strategy portfolios, the move indicates that some mainstream income funds are experimenting with bitcoin as a small diversifier.
Public-sector adoption is tentatively emerging, too. Texas became the first U.S. state to publicly invest in crypto assets this week—symbolic in size, but notable as a policy signal that may pave the way for direct bitcoin custody once the state’s infrastructure is ready. Even cautious participation by a state entity adds to the “institutional scaffolding” underneath the market.
How does this add up?
Bitfinex’s stabilization call rests on a few intertwined dynamics:
- Capitulation signs among short-term holders: SOPR falling below 1 means coins were sold at a loss—classic late-selloff behavior. The indicator has only breached this threshold a handful of times in the past two years, generally near local lows.
- Deleveraging in derivatives: With OI down from ~$94B to around ~$59–60B, fewer speculative positions are at risk of cascading liquidations, which can calm intraday swings.
- Tentative return of institutional demand: The flip back to net inflows in crypto ETPs, plus incremental buying from large funds, suggests some investors are re-risking—carefully.
None of this guarantees a straight path higher. Macro conditions, liquidity, and regulatory headlines can still jolt prices. But taken together, the data paints a picture of a market that is moving past forced selling and into a repair phase: lower leverage, more selective risk-taking, and a bias toward range-building after an acute drawdown. If flows continue to stabilize and derivatives positioning remains contained, historical patterns suggest volatility should compress before any sustained trend re-emerges.
Conclusion
For now, traders might expect a “two steps forward, one step back” tape: rebounds that fade at resistance, followed by higher lows as weak hands exit and stronger hands accumulate. Long-only allocators, meanwhile, will watch whether inflows persist, whether SOPR spends more time above 1 (implying profitable distribution instead of stressed selling), and whether open interest rebuilds at a measured pace—signs of a healthier market structure rather than another leveraged melt-up.
The worst of the shakeout looks to be behind the crypto market, with on-chain stress ebbing, leverage reduced, and early signs of institutional re-engagement. That’s what a stabilization phase looks like—messy in the day-to-day, but constructive under the hood.