Bitcoin investor sentiment has fallen to its weakest point since early 2023, but market analysts say the decline could signal the start of an uptrend.
Bitcoin Sentiment Drops to Two-Year Low, But ‘Risk-On’ Rally May Be Beginning
According to CryptoQuant’s latest “Weekly Crypto Report,” Bitcoin’s bullish rating index has fallen below 40 for the first time since 2024. This is an indicator that is generally consistent with bear market conditions.
Long periods below this threshold have historically been a precursor to prolonged declines, but have also created fertile ground for counter-trend rallies.
Despite the gloomy weather, Bitcoin has shown surprising resilience amid a sharp sell-off in traditional financial markets.
On April 3, the S&P 500 fell 4.5%, its worst single-day decline since the pandemic. Bitcoin defied the trend and continued to look in the green for the day.
The divergence continued on April 4, as both the S&P 500 and the Dow Jones fell further (down 3.87% and 3.44% respectively), while BTC remained stable near breakeven.
This relative strength is fueling speculation that a “risk-on” environment may be taking shape, with investors turning to riskier assets like cryptocurrencies.
CryptoQuant’s Value Days Destroyed (VDD) metric, which tracks the movement of long-held coins, currently stands at 0.72, down from its December peak of 2.27, indicating heavy profit-taking.
Historically, a cooling VDD has heralded consolidation and eventual accumulation, often setting the stage for a breakout.
“Bitcoin appears to be entering a transition phase,” the report said. “We are seeing less selling pressure from long-term holders, which could support price stability and even upward momentum.”
The Crypto Fear & Greed Index reflected the sentiment decline, recording 28 points (“Fear”) on April 4 after falling into “Extreme Fear” territory (25) the previous day.
*This is not investment advice.