Bitcoin is likely to see a short-term rebound early this week after a sharp sell-off that was driven by spot market activity rather than futures market speculation, according to a new analysis from research firm 10X Research. The firm argues that the market has been misattributing the recent decline, which was led by spot investors selling their holdings rather than aggressive short selling in the derivatives market.
Spot Market, Not Futures, Driving the Decline
In a report released over the weekend, 10X Research pointed to key data points challenging the prevailing narrative. The firm noted that Bitcoin funding rates actually rose by 0.9 percentage points last week to an annualized rate of 5.7%, indicating that long positions were still willing to pay a premium to maintain leverage. At the same time, futures open interest fell sharply by $3.5 billion to $21 billion, suggesting that the sell-off was accompanied by a reduction in leveraged positions, not an increase in short bets. This divergence between rising funding rates and falling open interest is a classic signal that spot selling, not futures shorting, is the primary force behind the price decline. The firm believes that the market has been blaming the wrong party for the past month, with many traders incorrectly attributing the drop to aggressive short sellers.
Oversold Conditions Point to Bounce
Following the steep decline, Bitcoin is now technically in oversold territory, according to 10X Research. This condition often precedes a short-term price bounce as selling pressure exhausts itself and buyers step in at lower levels. The firm expects a rebound early this week, but cautions that this should not be mistaken for a broader trend reversal. The broader outlook for Bitcoin remains uncertain, with macroeconomic headwinds and regulatory developments continuing to weigh on sentiment.
What This Means for Traders
For active traders, the analysis suggests a potential entry point for short-term long positions, but with a clear exit strategy. The oversold condition provides a technical setup for a bounce, but the underlying fundamentals have not changed. The sell-off was driven by real selling from spot holders, implying that the market may need more time to find a solid bottom before a sustained recovery can begin. For longer-term investors, the report reinforces the importance of distinguishing between noise and signal – short-term price movements driven by spot selling can create attractive buying opportunities, but do not necessarily indicate a change in the broader market cycle.
