Bitcoin is sending its most oversold signals in history as the current macroeconomic environment continues to see price wars and exchange-traded fund (ETF) outflows.
According to crypto slate According to the data, the price of BTC fell to around $62,700 in the past 24 hours, with a relative strength index (RSI) of around 25.7 for the week. BTC has risen to over $66,000 as of this writing.
Alex Thorne, head of research at Galaxy Digital, said the RSI this week is “lower than it has been at any time in all but the darkest bears.”
Thorne also pointed out that since 2016, the only times the measure has declined were in November and December 2018, when BTC prices fell from $6,000 to $3,000, and in June and July 2022, when crypto finance companies Genesis and Three Arrows Capital went bankrupt.
As a result, market observers have described the current situation as a “total capitulation,” arguing that similar extreme RSI increases have been followed by long, messy recoveries rather than instantaneous reversals.
Capitulation signals are flashing, but Bitcoin may still be in the foundation-building stage
Although momentum has reached extremes, Bitcoin price discovery still appears to be driven by forced sales, capital de-risking, and the transfer of inventory from weak holders to larger buyers.
This distinction is important because an oversold situation does not automatically indicate a bottom. These often appear when selling becomes mechanical rather than emotional.
In such a setup, liquidations, risk reduction, and reduced liquidity can leave the market locked in a weak momentum regime even after the initial panic phase begins to fade.
Glassnode data backs up that reading. The company’s 90-day realized profit/loss ratio for Bitcoin fell below 1, the threshold for what the company calls an “excess loss realization” regime.
As a practical matter, realized losses dominate the tape, suggesting that sellers are still marginal price setters.
CryptoQuant describes the same period as the most severe distress phase of the current drawdown.
The company said on-chain investors are posting the largest realized losses in history, while active traders are absorbing the largest losses this cycle. The company believes that stress has already changed who participates in the market.
The interpretation is that retailers have nearly capitulated, but the whales continue to accumulate with greater force.
This pattern, where weaker hands exit while larger holders absorb supply, is often seen in later stages of corrections as the market begins to build base.
CryptoQuant also characterizes this move as a correction rather than a full-blown bear market, comparing the magnitude of realized losses to November 2019, when Bitcoin subsequently rose.
This comparison is best treated as an analog rather than a prediction, but it reinforces the idea that significant realized losses can coincide with long-term opportunities.
This is where many RSI-based headlines miss the nuance. A record low RSI can indicate that a capitulation is in progress, and a capitulation is often a prerequisite for a bottom.
But that in itself does not confirm that the market is done looking for a permanent bid.
This helps explain why extreme RSI readings are often followed by volatile range trading rather than a V-shaped pullback. If the market is still dealing with large realized losses, buyers will tend to demand discounts, while trapped holders may sell into rising markets to reduce their exposure.
In this framework, RSI extremes are often understood as stage changes from capitulation to base building, rather than precise tipping points.
Alpharactal’s Sharpe ratio analysis points in a similar direction, but through a different lens.
While CryptoQuant focuses on on-chain loss realization and holder behavior, Alphactal focuses on risk-adjusted returns over a broader cycle. That data suggests that Bitcoin is in an advanced stage of its repair process, with a more compressed risk-return profile than it was a year ago.
The firm claims that allocating to BTC at current levels means lower expected returns in the coming months, but also lower relative risk than at the beginning of the decline.
Historically, even lower Sharpe ratio measurements have coincided with major bottoming phases, when the market’s risk-return profile is most compressed and long-term asymmetries begin to improve.
What Al-Factal is saying is that while Bitcoin may be approaching that zone, it may not be there yet.
Taken together, these signals represent a market under severe momentum stress, where realized losses are still being absorbed and risk-adjusted returns are becoming increasingly compressed.
This is consistent with a late stage repair stage. Although this is a constructive setup for foundation formation, it is not conclusive evidence that the repair is complete.
Billions of dollars have been drained from ETFs as institutional investors have run out of bids, leaving them illiquid.
What makes this pullback different from previous ones is that one of Bitcoin’s most visible demand channels is starting to decline.
The U.S. Spot Bitcoin ETF has recorded more than $4.5 billion in net outflows across its 12 funds since the start of the year, with consecutive redemptions spanning five weeks, according to data from SoSo Value.
In previous drawdowns, the ETF complex often acted as a stable marginal buyer. But this year, the trend reversed, with capital leaving wrappers as prices fell.
The impact was even more pronounced because the market was thinner than during previous declines.
According to Coin Metrics, the average spot Bitcoin order book depth, measured within plus or minus 2% of the mid-market price, decreased from approximately $40 million to $50 million from August to October 2025, then further decreased from $15 million to $25 million, and further decreased in February.
When the order book is shallow, selling pressure tends to cause prices to move more aggressively, creating air pockets and sharp downside gaps even in the absence of new catalysts.
Coinmetrics also noted a slowdown in stablecoin growth. The total supply of USDT and USDC is hovering around $260 billion, indicating that there is no new strong wave of liquidity in the market as Bitcoin attempts to establish a floor.
This pattern suggests a stagnation in new inflows rather than a widespread withdrawal from cryptocurrencies, but with other sources of demand already weakening, this distinction will provide limited short-term support.
CryptoQuant’s derivatives data further strengthens the defensive picture.
The firm said bears continue to dominate Bitcoin futures, with funding rates in negative territory around the current floor zone of approximately $62,000-$68,000. This is a notable change from an earlier low of around $80,000, when funding remained positive for most of the period.
CryptoQuant also stated that sell has been dominant since July 2025, with buy limit orders primarily acting as a passive absorber rather than an active driver of price. He added that the current selling pressure is the strongest in the past three months.
None of this excludes the possibility of a rebound. Negative financing can create a situation where a short squeeze occurs as bearish positions become crowded and physical selling begins to weaken.
But for now, the structure still suggests the market is trading defensively rather than showing clear signs of new risk appetite.
A similar sense of caution is reflected in the options market.
crypto slate We previously reported that demand for downside protection remained strong after Bitcoin rallied above $70,000 on February 6th, with traders concentrating on put strikes between $60,000 and $50,000 ahead of the February 27th deadline.
When put demand remains strong after a pullback, it usually indicates that traders are assigning meaningful odds to the further downside, even if spot buying is active.
(Tag translation) Bitcoin
