Bitcoin’s recent price dip, driven by the German government’s liquidation of seized assets, may signal an impending bullish reversal, according to ARK Invest.

In a report released on July 18, ARK Invest highlighted that Bitcoin became oversold in June following Germany’s large-scale sell-off of 50,000 BTC. This Bitcoin was confiscated in a 2020 police operation against Movie2k, a platform known for pirated content.

The market reaction saw Bitcoin’s price plummet from over $70,000 in early June to below $55,000 during a brief dip in July.

“Based on short-term holder realized profits/losses and miner outflows, Bitcoin appears oversold,” stated the report, which analyzed data up to June 30 and included more recent figures. “Current levels of miner outflows suggest that miners are capitulating, indicating a potential bullish reversal.”

ARK also pointed to the consistent interest in Bitcoin exchange-traded funds (ETFs) as a positive indicator. Despite the sharp sell-off, there was no significant withdrawal from spot Bitcoin ETFs. As of June 30, the drop in Bitcoin’s spot price exceeded the 30-day percentage change in ETF flows by 17.3%.

July witnessed substantial net inflows into Bitcoin ETFs, with approximately $1.35 billion invested in the week ending July 15, according to CoinShares. BlackRock’s iShares Bitcoin Trust (IBIT) reported $107 million in inflows on July 18, marking nine consecutive days of gains, as noted by Thomas Fahrer, co-founder of crypto data platform Apollo.

However, Bitcoin’s performance faces potential challenges from global economic trends. Declining corporate profits and reduced pricing power indicate economic weakness, which could impact Bitcoin prices, according to ARK.

Another potential hurdle is the repayment of around $9 billion in Bitcoin to creditors of the defunct cryptocurrency exchange Mt. Gox. Unlike the abrupt German sell-off, creditors may choose to hold their Bitcoin, potentially mitigating broader market impacts, industry analysts suggest.