marketsentiment

Crypto market sentiment has deteriorated to one of its weakest levels in the past four years, according to a recent research note from Matrixport. The firm stated on Tuesday that its internal sentiment gauge has dropped into deeply negative territory before showing early signs of stabilization — a shift that historically has coincided with the late stages of prolonged sell-offs in Bitcoin.
Matrixport highlighted that its 21-day moving average of market sentiment recently fell below zero and has begun to recover. While this does not confirm a bottom, the moderation of extreme bearish pressure suggests that forced selling may be gradually subsiding. However, analysts cautioned that short-term volatility and additional downside cannot be ruled out.
Extreme Fear Returns to the Market
Broader data reinforces the pessimistic backdrop. The widely followed Crypto Fear & Greed Index from Alternative.me has fallen to 10/100, signaling “Extreme Fear.” This marks the lowest level since June 2022 — a period that coincided with significant deleveraging across the digital asset sector.
Historically, such depressed readings have aligned with capitulation phases, where leveraged positions are liquidated and speculative excess is flushed out. Comparable sentiment troughs were observed in June 2024 and November 2025, both followed by periods of gradual stabilization and accumulation rather than immediate V-shaped recoveries.
The current decline in sentiment reflects months of persistent losses and weakening price momentum. The key question now circulating among traders: Has true capitulation already occurred — or is the market still in the distribution phase?
Technical Indicators Signal Rare Oversold Conditions
Frank Holmes, Executive Chairman of Hive Digital Technologies, noted that Bitcoin is currently trading nearly two standard deviations below its 20-day moving average — a statistical extreme seen only three times in the past five years.
Such deviations typically suggest that downside momentum may be overstretched. Historically, similar conditions have preceded short-term rebounds within the following 20 trading sessions. The logic is straightforward: when price extends too far from its statistical mean, normalization forces often drive a reversion.
Still, Holmes emphasized that while technical oversold signals can support short-term recovery scenarios, broader liquidity conditions and macroeconomic pressures remain critical variables.
A Five-Month Losing Streak — Longest Since 2018?
If February closes in negative territory, Bitcoin would record five consecutive months of decline — the longest losing streak since 2018. Rather than a sudden collapse, the pattern resembles a prolonged distribution phase, where confidence erodes gradually and liquidity thins.
Macro conditions have also played a role. Tighter financial liquidity, reduced risk appetite, and ongoing deleveraging in derivatives markets have contributed to weaker spot volumes and declining open interest. Sustainable bottoms typically form when:
Forced liquidations diminish
Funding rates stabilize
Open interest contracts meaningfully
Volatility compresses before expansion
Without these structural adjustments, markets often retest lower support levels before entering accumulation.
The $65,000 Psychological Level in Focus
In the short term, traders are closely monitoring Bitcoin’s ability to defend the key psychological support near $65,000. A sustained break below this level could extend corrective pressure into March. Conversely, stabilization above it may strengthen the early thesis of a developing base structure.
Matrixport maintains that while sentiment cycles often align with major turning points, precise timing remains inherently difficult — especially in fragile liquidity environments.
Final Thoughts
Extreme pessimism has historically marked inflection points in crypto markets. Yet sentiment alone is not a timing tool — it is a condition indicator. Whether this phase represents final capitulation or a transitional distribution stage will likely depend on liquidity flows, derivatives positioning, and macro stability in the weeks ahead.
What do you think — is this the bottom, or is another leg down still ahead? Drop your view below 👇
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