The Bitcoin bottom line flashes when the "fear and greed" index corresponds to the lowest in March 2020

The Bitcoin bottom line flashes when the “fear and greed” index corresponds to the lowest in March 2020 – Mail Bonus

Bitcoin (BTC) has fallen by more than 67% in 2022 and now fluctuates between a narrow trading range defined by $ 28,000 as interim support and $ 30,500 as interim resistance.

The sale follows the Central Bank’s hawkish policy and uncertainty in the cryptocurrency market led by Terra, a stablecoin algorithm project in which LUNA’s native symbol fell by 99% earlier this month.

Nevertheless, the decline of Bitcoin has cooled somewhat as May draws to a close, leaving speculators hoping that the symbol will bottom out.

Interestingly, Bitcoin’s Fear and Greed Index (F&G) also indicates the same scenario, says Arcane Research in its latest weekly report.

Bitcoin F&G reading peaked in March 2020

In detail, Bitcoin’s F&G reached a rating of 8 on May 17, indicating a “high level of fear”, the first since March 2020.

“We see that fear of buying has been a profitable policy in the past when measuring the median and average returns of previous extremist periods,” Arcane wrote, citing four cases in which F&G Bitcoin had fallen to 8.

The median price of Bitcoin yields after reaching “high fear” levels. Source: Arcane Research

Meanwhile, Ben Lilly, a marketing specialist at Jarvis Labs, added The fact that the Bitcoin F&G index falls below ten indicates a great possibility that the market will bottom out. He also pointed out that buying Bitcoin when F&G is cut below 10 is a good short-term strategy and said:

“Then it turns out that the policy where you keep it for a shorter period of time was more effective. Which means that the policy where you sold after F&G rose above 35 (yellow line in the picture [below]) gave better results than readings of 50 (orange) and 80 (red). “

F&G returns Bitcoin. Source: Twitter Handle Ben Lilly

On the other hand, Arcane emphasized that not all lower F&G levels have secured bullish retracement movements in the past; some preceded continued sales. For example, Bitcoin fell by almost 11% on April 7, 2018, just sixty days after F&G gained a lot of fear.

More evidence indicates a bottom

More signs of potential in the Bitcoin market come from some chain indicators.

For example, Glassnode’s MVRZ Z-Score, which estimates when Bitcoin is undervalued / “overvalued”, is approaching the green zone that preceded the massive cryptocurrency rebound, as shown in the image below.

Bitcoin MVRV Z stig. Source: Glassnode

At the same time, the LTH-SOPR indicator, which “measures the profitability of all market participants by comparing the value of output over time with created time,” also indicates that Bitcoin is bottoming out.

Specifically, when the LTH-SOPR value falls below 1, it underlines that some long-term holders of Bitcoin could sell BTC at a loss. On the other hand, a value above 1 indicates that they could sell at a profit.

As of May 25, the LTH-SOPR is 0.72, which could mean a potential bottom in the Bitcoin market because people will be reluctant to sell BTC at a loss.

Bitcoin LOTH: SOPR (SMA 7). Source: CryptoQuant

Sales warnings are still in place for BTC

Nevertheless, uplifting bottom lines appear in contrast to some other bearish signals elsewhere in the market and call for up to $ 15,500 and even under $ 10,000.

For example, Scott Minerd, investment manager at Guggenheim, claims that Bitcoin is on its way to $ 8,000, which is a 70% decrease from today’s price. Minerd cites a hawkish central bank for the bear outlook on Bitcoin, but its daily correlation with the Nasdaq has been positive since February 2022.

BTC / USD and Nasdaq 100 correlation. Source: TradingView

From a technical point of view, Bitcoin could certainly fall further towards the $ 22,000- $ 26,000 range before reaching the bottom.

Related: Bitcoin ‘death cross’ data indicates 43% decline due to BTC bear market

These levels coincide with two historical support levels – the 200-day exponential moving average (200-week EMA; blue wave) and the 200-day simple moving average (200-week SMA; orange wave) – which marked the end of BTC’s previous bearish cycle.

BTC / USD weekly price. Source: TradingView

“Towards the downside, the $ 25,000 bottom from May 12 is the closest support level below $ 29,000,” Arcane, Vetle Lunde and Jalan Mellerud researchers added, adding that the “next major support level” for Bitcoin could be around the $ 20,000, 2017 maximum. Brot:

“Towards the top, $ 30,500 has been a strong resistance area over the last week. If BTC breaks out of the resistance, $ 35,000 is the next key resistance area.”

The views and opinions expressed herein are those of the authors only and do not necessarily reflect the views of Every investment and trading business involves risk, you should conduct your own research when making a decision.