Analyst: Indicators show the market is in a "capitulation" phase and still faces further downside risk

BlockBeats News, February 2, analyst Axel Adler Jr. stated that the "Bitcoin Futures Capital Flow Index" combines price dynamics with derivatives capital flows (market order volume + changes in open interest).

Since last Friday, the capital flow index has plummeted from around 50 to a critical 7.1%, sitting at the lower limit of the index's scale and marking an extreme value for the past month. The price trend, which has been continuously flagged since January 28, confirms a persistent bear market condition. The key point is: since January 30, the index has fallen below the 45% threshold, which, according to the model's definition, signals entry into bear market territory.

Historically, a reading of 7.1% typically corresponds to a market capitulation zone. To achieve a state reversal, the index needs to rebound above 45% and prices must stabilize. Until then, any rebound technically remains a correction within the bear market structure.

Another index—the "Bitcoin Local Stress Index"—integrates volatility, funding rates, and leverage levels to form a comprehensive stress indicator. During the sell-off on the evening of January 31 (Friday), when the price fell below $78,000, this index once surged to a peak of 92.5. Throughout the weekend, the index remained in a "tail risk alert" state—indicating that all pressure valves (downward trend + increased volatility + capital flow bias) were simultaneously activated. The current reading of 73 is still in the "high" range.

Historically, when this index breaks above 90, it often coincides with local price bottoms. If, under a new round of stress, the LSI breaks above 80 again, it would signal a continuation of waterfall-like declines.

The two indicators together paint a picture: the capital flow index is at an extremely low level, while the local stress index is at a peak. This is characteristic of market "capitulation"—when pressure reaches its limit, the market begins to attempt to absorb liquidity shocks.