Bitcoin price bottom signals flash as 'fear and greed' index matches March 2020 lows

2 years ago

Bitcoin (BTC) has fallen by implicit 67% successful 2022 and is present wobbling betwixt a choky trading scope defined by $28,000 arsenic interim enactment and $30,500 arsenic interim resistance.

The selloff appears successful the aftermath of the Federal Reserve's hawkish policy and the uncertainties successful the crypto marketplace led by Terra, an algorithmic stablecoin task whose autochthonal token LUNA fell by 99% earlier successful the month.

Nonetheless, Bitcoin's diminution has somewhat cooled down arsenic May draws to a close, leaving speculators with the anticipation that the token is successful the process of bottoming out.

Something similar this mightiness play retired for #Bitcoin. Notice the little near country we had a treble bottommost earlier getting a greenish wave. We’re presently sitting astatine the bottommost of the wedge. We tin spell a small little and signifier different treble bottommost earlier reversing. pic.twitter.com/feuzp5tiDZ

— BitcoinAlArab (@BitcoinAlArabx) May 23, 2022

Interestingly, Bitcoin's Fear and Greed Index (F&G) besides hints astatine the aforesaid scenario, notes Arcane Research successful its latest play report.

Bitcoin F&G readings deed March 2020 lows

In detail, Bitcoin's F&G reached the people 8 connected May 17, indicating "extreme fear," a archetypal since March 2020.

"We spot that buying fearfulness has antecedently been a profitable strategy erstwhile measuring median and mean returns of erstwhile utmost fearfulness periods," Arcane wrote portion citing the 4 instances wherein Bitcoin's F&G had dropped to 8.

Meanwhile, Ben Lilly, marketplace researcher astatine Jarvis Labs, added that Bitcoin's F&G scale falling beneath 10 signals the utmost anticipation of the marketplace bottoming out. He besides noted that buying Bitcoin erstwhile its F&G people is beneath 10 is simply a bully short-term strategy, saying:

"Turns retired the strategy wherever you clasp it for little clip produced greater results. Meaning the strategy wherever you sold aft F&G roseate supra 35 (yellow enactment successful the illustration [below]) produced amended results than a speechmaking of 50 (orange) and 80 (red)."

On the flip side, Arcane highlighted that not each little F&G scores person guaranteed bullish retracement moves successful the past; immoderate preceded continued selloffs. For instance, Bitcoin dropped astir 11% connected April 7, 2018, conscionable sixty days aft its F&G reached utmost fearfulness levels.

More indicators awesome bottom

More signs of a imaginable successful the Bitcoin marketplace travel from respective on-chain indicators.

For instance, Glassnode's MVRZ Z-Score, which assesses erstwhile Bitcoin is undervalued/overvalued based connected its "fair value," is nearing the greenish portion that had preceded the crypto's monolithic rebound rallies, arsenic shown successful the illustration below.

Simultaneously, the Long Term Output Profit Ratio (LTH-SOPR) indicator, which "evaluates the nett ratio of the full marketplace participants by comparing the worth of outputs astatine the spent clip to created time," besides suggests that Bitcoin is bottoming out.

Specifically, erstwhile the LTH-SOPR worth falls beneath 1, it highlights that immoderate semipermanent Bitcoin holders could merchantability BTC astatine a loss. Conversely, a worth supra 1 shows that they could merchantability successful profit.

As of May 25, the LTH-SOPR is 0.72, which could mean a imaginable forming bottommost successful the Bitcoin marketplace due to the fact that radical volition beryllium reluctant to merchantability BTC astatine a loss.

Selloff warnings stay for BTC

Nevertheless, the uplifting bottommost indicators look successful opposition to a fewer different bearish signs elsewhere successful the marketplace and calls for as debased arsenic $15,500 and adjacent beneath $10,000.

For instance, Scott Minerd, main concern serviceman astatine Guggenheim, argues that Bitcoin is connected its mode to $8,000, a 70% driblet from today's price. Minerd cites a hawkish Federal Reserve for the bearish outlook connected Bitcoin, whose regular correlation with Nasdaq has been affirmative since February 2022.

From the method perspective, Bitcoin could so autumn further toward the $22,000-$26,000 scope earlier bottoming out.

These levels coincide with 2 humanities enactment levels—the 200-day exponential moving mean (200-week EMA; the bluish wave) and the 200-day elemental moving mean (200-week SMA; the orangish wave)—that marked the extremity of BTC's erstwhile bearish cycles.

"Towards the downside, the $25,000 bottommost from May 12th is the closest enactment level beneath $29,000," further noted Arcane's researchers Vetle Lunde and Jalan Mellerud, adding that Bitcoin's "next captious enactment level" could beryllium astir $20,000, the 2017 peak. Excerpts:

"Towards the upside, $30,500 has been a beardown absorption country implicit the past week. If BTC breaks retired of resistance, $35,000 is the adjacent cardinal absorption area."

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

View source