Current market sentiment is at its most negative of the year. This emotion, filled with fear and uncertainty, is not only fully manifested on social media but also directly reflects retail investors' pessimistic expectations for price trends in the short term. However, historical data shows that when market sentiment reaches extremes, it often means that the possibility of a price rebound is higher.
For example, on July 4 of this year, when negative comments significantly outnumbered positive comments, Bitcoin's price rose by about 17% in the following 11 days. A similar situation occurred on August 4, after which the price increased by 14.3% in just four days. Yesterday, our discussions on social media about bottom fishing even surpassed the record set in early August. Currently, market sentiment is again in a similar situation, with a ratio of positive to negative comments of four to five, reflecting retail investors' fear of further price declines. In other words, when the majority of people are panicking and leaving the market, it is often an excellent opportunity for long-term investors or contrarian thinkers to enter the market.
In the last bull market, Bitcoin saw a significant rally in mid-December 2020, which accelerated again at the end of December 2020. It seems that the actions in this cycle are slightly delayed; of course, we do not know whether this bull market cycle will form a double top. We need to pay attention to the market performance in the first quarter of next year. On January 20, Trump will officially take office, and FTX creditors will also begin to receive cash repayments, which are two potential price catalysts. Of course, on January 29, we have a 91% probability that we will not see a Fed rate cut. Due to the Fed's hawkish turn last week, this has already been reflected in the price to some extent, but new volatility is still expected next month.
Additionally, we can clearly see that the current market condition of Bitcoin bears a striking resemblance to the early trends of the last bull market. The key here lies in the changes in the RSI. In the early stages of the last Bitcoin bull market, there was also a significant RSI pullback, after which Bitcoin experienced several months of strong upward movement. This is not a reversal of market trends; rather, this pullback injects new momentum into the market. We can see signals from more indicators that the Bitcoin bull market is not yet over. Currently, Bitcoin is preparing to break away from the upper boundary of the Bollinger Bands, which successfully predicted reversal points in the previous two bull markets. It is now at a very critical stage.
At the same time, we need to pay attention to the inflow of stablecoins, which has a high correlation with Bitcoin prices. Whenever there is a peak in the change of stablecoin market capitalization over 60 days, Bitcoin prices often reach a peak at the same time. In other words, this indicator seems to predict the highs or turning points of Bitcoin prices to some extent. Although there have been some adjustments in prices recently, fortunately, it has not fallen below the 30-day moving average, more like a market washout behavior, laying the foundation for stronger upward movements in the future.
