Bitcoin market sentiment has dropped into extreme fear territory, with the Fear and Greed Index hitting levels last seen during the depths of the 2022 bear market. Vetle Lunde, senior analyst at K33 Research, points to striking similarities in price structure and leverage dynamics.
Futures Open Interest and Leverage Shrink Significantly
Lunde highlights a sharp decline in open interest and leverage across Bitcoin futures, a sign that speculative excesses are being flushed out. Historically, such broad deleveraging events have often coincided with the final stages of prolonged downturns, clearing the way for a structural bottom.
However, Lunde cautions that a structural reset does not guarantee an immediate price rebound. In previous cycles, Bitcoin has traded sideways for weeks or even months after similar deleveraging phases before mounting a sustained recovery.
Extreme Fear Reading Mirrors Past Market Bottoms
The Fear and Greed Index has slipped into 'extreme fear', a zone that historically marks peak pessimism and the exit of weak hands. Volatility has also compressed notably. Lunde notes that such periods have in the past preceded long-term value opportunities, yet they seldom produce an instant rally.
For example, after the FTX collapse in November 2022, the index dropped to single digits. Bitcoin did not break out until early 2023, after months of grinding consolidation.
Bitcoin Likely to Range Between $60,000 and $75,000
Lunde expects Bitcoin to trade within a broad range of $60,000 to $75,000 in the near term. This sideways movement may frustrate short-term traders seeking quick profits, but it could offer accumulation zones for patient long-term holders.
He warns that even though market health has improved on the structural front, investors should brace for a drawn-out consolidation. Rather than staring at daily price swings, the focus should be on the gradual rebuilding of market equilibrium — a process that historically preceded the next leg up.
In Lunde's words: "The current structure provides accumulation opportunities for long-term investors, but one should not expect an immediate rally."