The fear greed index is near all time lows, and Bitcoin is just hanging on near its 2021 bottom. There are multiple signs suggesting the market could be in for a bull run, however, due to the current state of the economy we may see any significant moves higher, delayed.
The Bullish Case
Since its inception in 2018, the fear greed index has only dipped to 10 or lower a total of 18 times. At face value, this doesn’t sound significant, but if you take a closer look you can see that most of these significant dips are in 3 groups, November of 2018, march of 2020, and may of 2021, and currently we are again seeing the same setup.
Historically, buying in these times of extreme fear has worked out pretty well, in fact Bitcoin was up over 80% in the next 4 1/2 to 7 months after each of these dips.
November 2018 the lowest the F&G index got was 8, following this, bitcoin peaked for a roughly 200% gain in a 7 month period.
In March 2020 we saw another low of 8, and Bitcoin was up 89% roughly 4 months later.
Again in Late may 2021 F&G index hit a low of 10, Bitcoin was up over 80% in the next 5 ½ months.
Here’s a chart that demonstrates Bitcoins short term performance Post extreme fear.
The Bearish Case
It’s always fun to find the exciting bullish signals and proceed to get irrationally excited and bullish. However, if we want to make smart decisions it’s important to take a step back and look at the other side of the story.
Bitcoin was created in 2008 and it really hasn’t gained mass popularity until the last roughly 3 years, meaning it doesn’t have much of a historical track record in significant economic turmoil. Some may mention 2020, which is a terrible example. 2020 was a strong economy which got force-stopped by a pandemic and government, and propped up by quantitative easing and trillions of dollars in stimulus checks.
Today the economy is seeing rampant inflation, slowing growth, and substantial interest rate hikes from the federal reserve, who are scrambling to slow inflation after waiting far too long to do anything, not to mention a lingering war in eastern Europe.
Our Case
Bitcoin has been massively consolidating after the recent Terra failure which sent the entire market into a dive. Consolidation often means there is some sort of significant move in store, whether it be to the upside or downside.
In the short term, specifically before the Fed eases off raising rates and tightening policy, there may not be much excitement in the crypto market aside from a possible bear market rally, which some analysts are calling for in the stock market.
This data suggests a move to the upside as long as bitcoin can stay above its bottom. However, if it drops below recent support of $28,000 than the trend is not in our favor.