Bitcoin Sentiment Crashes to 4-Year Extreme Low

Key Insights

• Crypto market sentiment dropped to four-year lows.
• Matrixport signaled a possible durable Bitcoin bottom.
• Oversold readings historically preceded short-term rebounds.

Matrixport said Tuesday that crypto market sentiment fell to extreme lows, pointing to a potential durable bottom for Bitcoin. The firm’s internal metric showed its 21-day average moved below zero and turned higher. That shift suggested selling pressure had begun to exhaust, though analysts warned further short-term declines remained possible.

The latest reading arrived as Bitcoin sentiment hovered near levels last seen during steep market drawdowns. Crypto market sentiment deteriorated amid sustained monthly losses and weak price momentum. That backdrop raised questions about whether capitulation had already occurred or still lay ahead.

Market Reaction Mirrors Prior Capitulation Phases

Matrixport’s research note described broad pessimism across digital asset markets, reflecting a prolonged correction phase. Its proprietary fear and greed index turned upward after dropping into deeply negative territory. Historically, the firm observed that such transitions aligned with durable bottoms forming after extended selling cycles.

Bitcoin sentiment hits extreme lows. Source: Matrixport

Alternative.me data showed its widely followed Fear and Greed Index printed a reading of 10 out of 100. That level marked extreme fear and stood near the lowest point since June 2022. The indicator’s prior troughs coincided with sharp market drawdowns that later stabilized.

The current sentiment downturn echoed periods around June 2024 and November 2025. Those episodes followed steep declines that flushed leveraged positions and reduced speculative activity. Market structure then shifted from aggressive selling toward gradual consolidation.

Technical Metrics Point to Rare Oversold Conditions

Frank Holmes, chairman of Bitcoin mining firm Hive, said Monday that Bitcoin traded roughly two standard deviations below its 20-day norm. He noted that this setup appeared only three times in the past five years. Historical data suggested those extremes often preceded short-term rebounds across the following 20 trading sessions.

BTC is in historic oversold territory, creating opportunity. Source: Hive

Such deviations from statistical averages indicated stretched downside momentum. This shift occurred because sustained liquidation pressure compressed price action below typical volatility bands. Once volatility normalized, price often reverted toward its mean.

Despite short-term weakness, Holmes maintained a constructive long-term stance. He argued that underlying fundamentals remained intact even as sentiment deteriorated. That divergence between price and fundamentals historically attracted incremental buyers during capitulation phases.

Cyclical Sentiment Patterns Frame Market Structure

Matrixport emphasized the cyclical link between crypto market sentiment and Bitcoin price action. Deeply negative readings often aligned with inflection points in broader market cycles. However, the firm cautioned that timing those reversals remained difficult amid fragile liquidity conditions.

Extended monthly losses amplified psychological pressure across retail and institutional participants. If February closes in the red, Bitcoin would register its fifth consecutive monthly decline, the longest streak since 2018. That pattern reflected sustained distribution rather than abrupt capitulation.

Broader macro conditions also shaped sentiment trends. Tighter liquidity and risk-off positioning weighed on speculative assets, pushing crypto market sentiment into depressed territory. As leverage unwound, volatility compressed, and spot volumes thinned across exchanges.

Durable bottoms typically formed when forced selling subsided and incremental demand returned. That process required stabilization in derivatives funding rates and reduced open interest volatility. Without those adjustments, downside probes often persisted before durable accumulation emerged.

For now, the market watched whether the 21-day sentiment average maintained its upward reversal. A failure to hold that shift would weaken the durable bottom thesis. Conversely, continued stabilization could support gradual consolidation before the next directional move.

In the near term, traders focused on whether Bitcoin defended key psychological support near 65,000. A decisive breakdown would extend corrective pressure into March, while stabilization above that zone could validate early bottoming signals.

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