Bitcoin (BTC) is starting to show signs of consolidation in the low $60,000 range – trading around $64,300 as of late Thursday. However, the BTC Fear and Greed indicator is moving into a zone historically associated with market bottoms.
BTC approaching bottoming phase?
What stands isn’t just the Fear and Greed indicator reading, but the behavior of the 30 of the 365 day averages relative to the index’s 25th percentile – the lower quartile of its historical distribution.
Since 2018, every major bottoming phase has pushed the 30-day average below the aforementioned threshold. For instance, around the 2018 bear-market low the metric fell around 14.9, while following the March 2020 crash, it tumbled to 12.1.
Meanwhile, during the 2021 summer bottom it cratered to 19.7, around 11.1 amid the June 2022 capitulation, and during the November-December 2022 base it was hovering around 24.1.
It is worth highlighting that the Fear and Greed Index doesn’t exactly identify the market bottom. In multiple cases, the average bottomed after price because it required weeks of persistent fear to turn.
What the indicator measures more effectively is whether panic has become sustained enough to exhaust weak hands. The current reading actually meets this condition.
For example, the 30-day average was trading below the 25th percentile from June 9 to July 31 and reached 15.2. Although, it has now recovered to 26.5.
At the same time, the 365-day average has declined to 28.5. This leaves the two averages only two points apart – short-term sentiment is healing while the long-term baseline is still deteriorating.
The aforementioned compression matters. It shows that the gap between benign fear and structural fear has largely closed. Historically, such dynamics have emerged during mature accumulation zones.
However, the 2022 experience also serves as a cautionary tale. The 30-day average first recovered toward the annual trend in August BTC Bitcoin fell another 21 percent into November.
BTC rally needs strong liquidity
While technical analysts opine that BTC may take another dip to $60,000 before resuming its bullish trend, the top cryptocurrency by market cap is in dire need of liquidity to sustain its upward trajectory.
Weak spot demand for the digital asset is not overshadowing strong bullish signs, such as the NVT golden cross that emerged on July 30th.
It’s not surprising to see BTC whales continuing to accumulate the digital asset, despite the high risk of it seeing another sell-off around $70,000 zone.
