Bear Market or Cycle Correction?

In Brief

• Fear and Greed Index at 10 signals extreme market fear.
• Bitcoin’s funding rates in -60% to -70%, hinting at possible rebound.
• Market uncertainty rises as Bitcoin struggles to reclaim $90,000.

The Fear and Greed Index has plummeted to a historically low level of 10, indicating extreme fear in the market. This comes after a massive liquidation event on October 10, 2023, which led to a steep sell-off in the cryptocurrency space. 

Since then, liquidity has dried up, as both market makers and investors have pulled back to protect their capital. ETF outflows and a drop in global demand have followed, contributing to the negative sentiment.

However, the Fear and Greed Index has slightly rebounded to 28, still within the fear zone. Despite this, many investors are becoming increasingly bearish, with discussions about the onset of a bear market gaining momentum. 

While it’s difficult to pinpoint whether this is merely a mid-cycle correction or the start of a bear market, current sentiment suggests that a more cautious outlook is prevailing across the market.

Bitcoin’s Struggles Highlight Ongoing Uncertainty Amid Bearish Sentiment

Bitcoin’s perpetual futures funding rates have also been on a steady decline, indicating a shift toward bearish sentiment among leverage traders. 

Currently, funding rates are in the -60% to -70% range, which often signals the potential for a short-term upward move. Historically, such conditions have triggered price rebounds for Bitcoin, though no definitive bullish trend has formed.

Bitcoin recently tested the $88,000 level before bouncing back, but analysts suggest the cryptocurrency must reclaim the $90,000 mark for a meaningful upside. A failure to do so may see Bitcoin revisiting the $87,000-$88,000 range. 

As the market faces these volatile conditions, investors are urged to prepare for both bear and bull scenarios.