Bitcoin Enters "Extreme Fear": Is a Short-term Rebound Window Here?

Be Greedy When Others Are Fearful?

Recently, Bitcoin market sentiment has fallen into the rare "extreme fear" zone, a level not seen in nearly a decade. Both on-chain sentiment models and technical indicators show the 20-day moving average approaching the lowest 10% region in history, and the self-developed Greed & Fear Index has also dropped to the lower edge of its measurement range.

Historically, such extreme readings are usually accompanied by a rebound window lasting from several days to several weeks, providing certain opportunities for short-term traders.

However, beneath the surface panic selling, the deeper structural issues of this downturn remain far from resolved.

01 Sentiment Bottoming Out: The Lure of a Short-term Rebound

From a technical analysis perspective, the market is now in an oversold state. Extreme fear sentiment often creates a temporary bottom, offering short-term traders a window to capitalize on a rebound.

Historical data indicates that when the self-developed Greed & Fear Index drops to the current level, the market typically sees some degree of rebound in the following days or weeks. This sentiment-driven recovery creates an ideal environment for short-term trading.

However, unlike the previous rebound, the triggers for this round of decline are still present and active. Some key indicators have even diverged from price trends, suggesting that the underlying structural problems in the market have yet to be fundamentally resolved.

Sentiment can bottom out instantly, but a true trend reversal requires stronger macroeconomic support, which is currently lacking.

02 ETFs Are the Main Cause of the Decline: Institutional Behavior Becomes Mechanical

Compared to retail sentiment swings, ETF capital flows are the key driver of recent market trends. Since the last FOMC meeting, Bitcoin and Ethereum ETFs have recorded massive outflows of about $4.1 billion and $2.1 billion, respectively.

More concerning is that heavy allocations earlier this year have left most institutional investors in a loss position. Their portfolio rebalancing is highly "mechanical," and in times of policy uncertainty, their reduction of positions is almost a predictable inevitability.

This institution-led, almost programmatic selling behavior prolongs structural downward pressure on the market, making any rebound face heavy selling pressure. ETFs were supposed to bring incremental funds to the market, but now they have become a persistent source of capital drain.

03 Macro Pressure: Fed Remains Hawkish

The macro environment is also unfriendly to the Bitcoin market. The Federal Reserve sent a clear hawkish signal in its latest meeting minutes, with the probability of a December rate cut plunging from 90% to 30%.

Officials generally believe there is no need to rush to ease policy and have expressed concerns about the market potentially overheating due to AI. Coupled with a still robust labor market, there is little practical basis for short-term easing.

Even if marginal policy improvements occur in the future, the likeliest timing would be early 2026, not now. This means Bitcoin will have to operate under high pressure for quite some time.

Short-term traders may be able to find opportunities in the rebound window with advanced skills, but for ordinary investors, it may be wiser to stay patient rather than blindly bottom-fishing amid structural selling pressure and macro headwinds.

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