Price down more than 67% in 2022 and is currently hovering in a tough trading range limited between $28,000 – interim support and $30,500 – interim resistance.

The sell-off trend comes after the hawkish policy of the US Federal Reserve (Fed) and the uncertainties in the cryptocurrency market due to activate, a project the algorithm has the original token dropped 99% in value earlier this month.

However, the decreasing trend of has somewhat cooled off as May draws to a close, leaving speculators hopeful that the token is in the process of bottoming out.

“Something like this could have the effect of Bitcoin. Notice the lower left corner, we had a double bottom before getting the green wave. is currently at the bottom of the wedge. Price could go a little lower and form another double bottom before reversing.”

The source: BitcoinAlArabx

What's interesting is that the fear and greed index of Bitcoin (F&G) also suggests a similar scenario, like Arcane Research note in its latest weekly report.

Bitcoin F&G hits the low of March 2020

Specifically, Bitcoin's F&G hit 8 on May 17 for the first time, showing "extreme fear," since March 2020.

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Arcane cited four cases where Bitcoin's F&G dropped to eight and said:

“We have found that buying in the context of fear has previously been a profitable strategy when measuring the average return of periods of extreme fear.”

Bitcoin Average Profit After “Fear” | Source: Arcane Research

Meanwhile, market researcher Ben Lilly at Jarvis Labs say more that Bitcoin's F&G Index falls below 10, signaling that the market bottom is very likely. He also notes that buying Bitcoin when the F&G is below 10 is a good short-term strategy.

“Turns out strategy in less time will yield better results. It means that a strategy of selling after F&G rises above 35 (yellow line in the chart below) produces better results than above 50 (orange) and 80 (red).”

bitcoin

Profit for Bitcoin by F&G | Source: Ben Lilly

On the other hand, Arcane emphasizes that not all lower F&G points warrant a return to past upside as several previous instances of continued sell-off. For example, Bitcoin dropped by nearly 11% on April 7, 2018, just 60 days after F&G reached extreme fear.

Other indicators signal a bottom

Several on-chain indicators show more possible signs in the Bitcoin market.

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For example, the MVRZ Z-Score of judge when Bitcoin is undervalued/overvalued based on its “fair value”. This indicator is close to the green zone before major rallies as shown in the chart below.

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MVRV Z Score Bitcoin | The source: Glassnode

At the same time, the long-term output rate of return (LTH-SOPR) indicator, “assesses the rate of return of all market participants by comparing the value of the output transaction at the time of spending.” target to the time it was created”, also shows that Bitcoin is bottoming out.

Specifically, when the LTH-SOPR value falls below 1, it reflects that some long-term Bitcoin holders may sell at a loss and vice versa.

As of May 25, the LTH-SOPR is 0.72, which means a potential bottom is forming in the Bitcoin market as people won't want to sell at a loss.

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LOTH:SOPR of Bitcoin (SMA 7) | The source: CryptoQuant

Bitcoin sell-off warning still exists

However, the bottom indicators appear in contrast to some of the other bearish signs in the market and predict a low of $15,500 or even below $10,000.

For example, investment director Scott Minerd at Guggenheim argues that Bitcoin is on track to hit $8,000, down 70% from today's price. Minerd cites the hawkish attitude of the Fed as the cause of Bitcoin's woes. At the same time, the king has a positive daily correlation with Nasdaq since February 2022.

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bitcoin

Correlation between with Nasdaq 100 | The source: TradingView

From a technical perspective, Bitcoin could actually drop further towards the $22,000-26,000 range before bottoming out.

These levels coincide with two historical support levels – the 200-day exponential moving average (200-week EMA, blue wave) and the 200-day simple moving average (200-week SMA, orange wave) – that have marked a move up. the end of BTC's previous bear cycles.

bitcoin

Weekly BTC Price Chart | Source: TradingView

Arcane researchers Vetle Lunde and Jalan Mellerud further note that the “next key support” could be around $20,000 – the peak of 2017:

“On the downside, the $25,000 bottom from May 12 is the nearest support below $29,000. On the upside, $30,500 was a strong resistance area last week. If BTC breaks above this barrier, $35,000 is the next key resistance area.”

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