Bear market nearing the end! K33 Research: Bitcoin will enter a "long period of consolidation" with little chance of a major rally in the short term

Bitcoin’s recent trend has been sluggish, leading many investors to exclaim “winter has returned.” Research firm K33 Research released a report on Tuesday indicating that the current market structure closely resembles the late stages of the 2022 bear market. The indicators suggest that while the market is nearing a bottom, it may be difficult to see a breakthrough rally in the short term.

Vetle Lunde, head of research at K33, pointed out that the company’s proprietary “market mechanism indicator” shows that current data—such as derivatives yields, open interest, ETF capital flows, and the US yield curve—are “strongly similar” to September and November 2022. These two periods marked critical phases close to the bottom of the previous bear market.

However, Lunde also cautioned that although these signs often appear near market bottoms, they are usually followed not by rapid rebounds but by weak price performance, prolonged and dull sideways trading phases, which will test investors’ patience.

The K33 report states that since Bitcoin hit its high in January this year, it has retraced nearly 28%. Meanwhile, the derivatives market reflects a clear defensive posture. Funding rates have remained negative for 11 consecutive days, indicating that risk aversion exceeds speculative buying momentum; at the same time, nominal open interest has fallen below 260,000 BTC, reflecting active short covering and a wait-and-see attitude among investors.

Lunde analyzed that this structure suggests that the short-term risk of “short squeeze” or “long squeeze” driven by derivatives is relatively limited. The market appears to be digesting the previous decline rather than brewing a new directional breakout.

K33 emphasizes that its model assigns the highest weight to derivatives data because these figures most accurately reflect real-time market demand for hedging or upside exposure. Negative yields indicate excess risk aversion, while declining open interest shows traders are closing positions rather than actively establishing new long or short bets.

The firm notes that in highly similar market environments, historical returns over 90 days average about 3%; in less similar scenarios, returns tend to be slightly negative. In other words, Bitcoin is more likely to enter a phase of “slow progress and emotional exhaustion” sideways trading.

Lunde predicts that Bitcoin will consolidate between $60,000 and $75,000. He believes that although current entry points are attractive, investors need patience, as the transition from “end of bear” to “beginning of bull” will be a long psychological battle.

Following recent sell-offs, market activity has noticeably cooled. Bitcoin spot trading volume has decreased by 59% week-over-week, and futures open interest has fallen to a four-month low. Such patterns have historically appeared during phases when the market absorbs losses and stabilizes gradually.

Lunde stated that as market volatility begins to normalize and turbulence subsides, it further confirms that the market is entering a “low noise, low stimulation” trading environment.

Institutional investor activity also reflects cautious sentiment. K33 notes that participation by CME institutional traders has been subdued recently, with yields and open interest remaining flat, indicating a lack of strong directional consensus.

Meanwhile, since the high in October last year, Bitcoin ETPs have experienced a net outflow of 103,113 BTC. Despite the price dropping nearly 50% from its peak, about 93% of institutional exposure remains “on hold.” This suggests that while professionals are reducing their positions, they are not fully retreating.

On sentiment indicators, the Crypto Fear & Greed Index recently fell to a historic low of 5, indicating extreme market pessimism. However, Lunde warned that this index has limited predictive power for future gains.

K33 states that buying during “extreme fear” yields an average return of only 2.4% over 90 days; in contrast, buying during “extreme greed” results in a much higher 95% return in the same period. This again confirms that panic sentiment alone is not a reliable signal for a rebound.