'If you want to be wrong, follow the masses': K33 says bitcoin deeply oversold with no compelling reason to sell

Bitcoin (BTC) has entered one of its most oversold weekly levels on record following months of persistent selling pressure, according to research and brokerage firm K33.

"If you want to be wrong, follow the masses," Head of Research Vetle Lunde wrote in the firm's latest report, pointing to widespread pessimism and defensive positioning across crypto derivatives markets.

After enduring six consecutive weekly declines and five straight down months — one of the longest losing streaks in the asset's history — bitcoin's weekly relative strength index recently fell to 26.84 — the third-lowest reading on record, Lunde noted.

Per the report, much of the recent decline has been driven by selling from long-term holders and institutional investors. Throughout the fourth quarter of 2025, supply aged six months or more declined sharply, while exchange-traded investors reduced exposure by nearly 100,000 BTC, and CME futures open interest dropped to two-year lows, Lunde said. However, these outflows have recently begun to ease.

Derivatives markets show extreme bearish positioning

K33 highlighted derivatives markets as one of the clearest indicators of current sentiment. The 30-day average funding rate in bitcoin perpetual futures recently turned negative, marking only the tenth time such a condition has occurred since 2018.

Negative funding rates indicate persistent demand to reduce long exposure or establish short positions, pushing perpetual futures to trade at discounts relative to spot markets.

Options markets show similar sentiment. Traders have been paying heavily for downside protection — "in other words, [they have] been willing to pay a chunky premium for bearish bets," Lunde said.

Previous periods of such negative funding have often been followed by stronger bitcoin returns, particularly over longer time horizons. Based on historical data, average 30-day returns after similar regimes have been about 13% with a 56% win rate, improving to a 78% win rate over 90 and 180 days, with average gains of 62% and 101%, respectively, Lunde noted.

Despite the defensive derivatives positioning, bitcoin has shown relative stability during escalating geopolitical tensions in the Middle East. Following U.S. and Israeli attacks on Iran and subsequent retaliation — including strikes on oil refineries and the closure of the Strait of Hormuz — oil and gas prices surged and equity markets declined, while bitcoin posted modest gains over the same period.

Lunde said bitcoin's resilience partly reflects the significant de-risking over recent months. Institutional exposure on CME has fallen roughly 35%, while ETF investors reduced holdings by about 90,000 BTC over the past five months. Meanwhile, selling pressure from long-term holders appears to be easing, with supply aged six months or more beginning to increase again, he added. Bitcoin is also consolidating near its 200-week moving average — a level that has historically coincided with market bottoms.

"The worst is behind us; now we wait," Lunde wrote.

Bitcoin is currently trading just below $71,000, according to The Block's BTC price page, up 4.7% over the past 24 hours and 8.7% in the last week.

"We see no compelling reason to sell BTC at current levels," the analyst concluded, arguing that the market's current risk-reward profile favors accumulation even though bottoming phases in bitcoin historically take time to develop.