Bitcoin (BTC) has recently faced a significant decline, falling by over 10% in the past week, its largest drop in the last month. This sharp downturn has been largely driven by panic selling, but historical data suggests that a potential rebound could be on the horizon if buying activity picks up.

The Panic Sell-off and Market Capitulation

In the last 24 hours, Bitcoin continued its bearish trend, with a 2.38% drop, marking its first major market capitulation since August 2024. The sharp sell-off was driven by new investors who may have been caught off guard by the sudden decline, resulting in the liquidation of 79,000 BTC in the spot market and $1.7 billion in derivative contracts.

Bitcoin’s price briefly dipped below $90,000, a level it hadn’t touched in three months. However, this major capitulation has led to a significant shift in the market. As history has shown, such periods of intense sell-offs are often followed by strong rebounds.

Signs of a Potential Rally

Although the panic selling has caused immediate losses, there are key signs pointing toward a potential rebound. A crucial indicator is the STH-SOPR (Spent Output Profit Ratio), which tracks the behavior of short-term holders (STH). When this ratio drops below the lower Bollinger Band, it often signals a buying opportunity, with Bitcoin historically experiencing strong rallies afterward.

Currently, Bitcoin is in this phase, with the STH-SOPR below the lower Bollinger Band. Previous instances of this occurring have resulted in price gains ranging from 8% to 42%. If this pattern holds, Bitcoin could soon experience a significant upside move, recovering some of the losses from the recent downturn.

Increasing Buying Activity and Bullish Sentiment

Despite the initial panic, there are growing signs of bullish sentiment returning to the market. In the last few hours, short liquidations have massively outpaced long liquidations, with $11.59 million in short positions being liquidated compared to just $663,900 in long liquidations. This is a clear indication that the market is moving against the sellers, and strong buying activity is beginning to emerge.

Furthermore, funding rate data suggests that long traders dominate the market, with a positive funding rate of 0.0039%. This is another bullish signal, suggesting that more traders are positioning themselves for a price increase rather than betting on further declines.

Historical Patterns and Future Outlook

Bitcoin’s price history shows that following major capitulation events, the cryptocurrency has often seen a period of recovery. A similar event occurred in August 2024, where Bitcoin’s price dipped sharply but began rising steadily afterward. With a similar sell-off occurring now, there is a strong chance that Bitcoin could experience a similar bounce in the coming days or weeks.

However, the success of this potential rally depends largely on continued buying interest. If buying activity continues to increase and more traders step in to capitalize on lower prices, Bitcoin could see a significant price surge in the coming weeks, potentially setting new highs.

Conclusion: Is Bitcoin Ready for a Rebound?

Bitcoin’s recent 10% drop may have caused panic among some investors, but the indicators suggest that the cryptocurrency could be on the verge of a major rebound. With strong signs of buying activity and a historical pattern of recovery following capitulation, Bitcoin could soon regain momentum. As the market sentiment shifts, Bitcoin’s price may surge once again, offering investors a potential opportunity to capitalize on the rebound.