Indicators of bitcoin price decline and fear and greed index are at their lowest level since March 2020

Indicators of bitcoin price decline and fear and greed index are at their lowest level since March 2020

Bitcoin (BTC) has fallen over 67% in 2022 and is now hovering within a tight trading range defined by $ 28,000 as intermediate support and $ 30,500 as intermediate resistance.

The withdrawal is due to aggressive Federal Reserve policy and uncertainties in the cryptocurrency market led by Terra, a stablecoin algorithmic project whose native LUNA token fell 99% earlier in the month.

However, bitcoin’s decline has slowed slightly with the end of May approaching, leaving speculators optimistic that the asset is declining.

Something like this could happen to #bitcoin. Note the lower left corner, we had a double bottom before we got a green wave. We are sitting at the bottom of the wedge right now. We can go a little lower and do another double bottom before reversing.
– BitcoinAlArab (@BitcoinAlArabx) May 23, 2022

It is noteworthy that the bitcoin fear and greed (F&G) index also suggests the same scenario, says Arcane Research in its most recent weekly report.

Bitcoin’s fear and greed index hits its lowest levels since March 2020

In detail, F&G bitcoins reached an 8 rating on May 17, expressing “extreme fear”, the first since March 2020.

“We see that buying fear in the past was a profitable strategy by measuring the average and average yields of previous extreme fear periods,” writes Arcane, citing the four instances where bitcoin’s fear index and greed were reduced to 8.

The average bitcoin price returns after hitting “extreme fear” levels. Source: Arcane Research

Said Ben Lilly, Market Research Specialist at Jarvis Labs added that the fall in bitcoin’s fear and greed index below 10 indicates the great potential for a return to normal market life. He also noted that buying bitcoin is a good short-term strategy when its fear and greed index is below 10, saying:

“It simply came to our notice then. That is, the strategy in which you sold after the F&G broke above 35 (yellow line in the chart [ci-dessous](c) results better than 50 (orange) and 80 (red) readings ”.

F&G returns for bitcoin. Source: Ben Lilly’s Twitter handle

Arcane, on the other hand, pointed out that not all of F & G’s low scores had guaranteed bullish reversals in the past; some preceded successive detachments. For example, bitcoin fell almost 11% on April 7, 2018, just sixty days after its F&G reached extreme fear levels.

Additional indicators indicate bottom

Other potential underlying signals in the bitcoin market come from a number of indicators on a chain.

For example, Z-Score MVRZ Glassnode, which assesses when bitcoin is undervalued / valued at its “fair value”, is approaching the green zone that preceded the cryptocurrency ‘s massive recovery rallies, as shown in the graph. below.

Z-Score MVRV of Bitcoin. Source: Glassnode

At the same time, the indicator provides a long-term retirement profitability ratio (LTH-SOPR), which “evaluates the profitability ratio of each market participant by comparing the value of exits at the time of expenditure with the value of achievement,” with also suggest that bitcoin is at the bottom. .

Specifically, when the value of the LTH-SOPR falls below 1, it highlights that some long-term bitcoin holders may sell BTC at a loss. Conversely, a value greater than 1 indicates that they could sell for a profit.

As of May 25, the LTH-SOPR is 0.72, which may indicate a potential bottom formation in the bitcoin market as people will be reluctant to sell BTC at a loss.

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

Liquidation warnings remain for BTC

However, the bottom bullish indicators appear in contrast to some other bearish signals elsewhere in the market and calls for falling down to $ 15,500 and even below $ 10,000.

For example, Scott Minerd, chief investment officer at Guggenheim, argues that bitcoin is on its way to $ 8,000, a 70% drop from the current price. Minerd cites an aggressive Federal Reserve to explain the bearish outlook for bitcoin, whose daily correlation with the Nasdaq has been positive since February 2022.

Correlation between the BTC / USD pair and the Nasdaq 100. Source: TradingView

Technically, bitcoin could fall further towards the $ 22,000- $ 26,000 range before hitting the bottom.

SEE ALSO: Bitcoin Data Tips ‘Cross Death’ at 43% Fall in Bitcoin Price Bear Market

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

Weekly price chart for the BTC / USD pair. Source: Trade View

“In addition, the May 12 bottom of $ 25,000 is the closest support level to under $ 29,000,” Arcane, Vetle Lunde and Jalan Mellerud researchers further noted, adding that bitcoin’s “next crucial support level” could be around at $ 20,000, high 2017. Quotes:

“Over $ 30,500 has been a strong resistance area over the past week. If BTC breaks through resistance, the next key resistance zone is $ 35,000. ”

The views and opinions expressed herein are those of the author only and do not necessarily reflect the views of All investments and trading operations involve risk, you should do your own research before making a decision.

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