Crypto Assets fear index falls to 22, hitting a new annual low! Bitwise: buy the dip opportunity has arrived.

The Crypto Assets Fear and Greed Index has fallen to a “fear” level of 22, marking a one-year low, significantly down from last week's “greed” index of 71. However, the analysis team led by Bitwise Director and Research Head André Dragosch believes that the current landscape favors accumulation rather than retreat.

Crypto Assets Fear Index has fallen sharply from 71 to 22, hitting a yearly low

(Source: Alternative Me)

Recently, the weakness in Bitcoin prices seems to have dampened market enthusiasm, while Google search interest in the asset has fallen to a multi-month low. The latest market sentiment data reflects typical conditions of a bearish phase, during which cautious sentiment dominates the overall mood of the Crypto Assets market. According to a report by Cointelegraph, the Crypto Assets Fear Index has dropped to a “fear” level of 22, the lowest in a year, a significant decline from last week's “greed” index of 71.

This dramatic reversal from extreme greed to extreme fear is not uncommon in the history of the Crypto Assets market. The Crypto Assets Fear Index is a sentiment indicator calculated from multiple factors, including market volatility (25%), market trading volume (25%), social media sentiment (15%), surveys (15%), Bitcoin market dominance (10%), and Google Trends data (10%). When the index falls below 25, the market is considered to be in a state of “extreme fear,” which historically has often been a time for contrarian investors to seek buying opportunities.

This drop corresponds with the sentiment level when Bitcoin briefly fell below $74,000 in April 2024, and is similar to the market downturns before 2018 and 2022. During the bear market of 2018, the Crypto Assets Fear Index remained below 20 for an extended period, when Bitcoin plummeted from $17,000 at the beginning of the year to $3,200 by the end. The Luna collapse and FTX bankruptcy in 2022 also pushed the index to historical lows. Although the current reading of 22 has not yet reached extreme historical values, it has clearly entered the panic zone.

The current trading price of Bitcoin is approximately $108,364, which is about 14% lower than the historical high of $126,000. This price retracement, combined with the collapse of the sentiment index, forms a typical market bottoming characteristic. From a technical analysis perspective, when the encryption currency fear index falls below 30, the probability of a price rebound within the subsequent 30 days has historically exceeded 70%. This statistical pattern provides empirical support for Bitwise's optimistic argument.

Why Bitwise Believes Panic is a Buying Opportunity

(Source: Bitwise)

Despite the sharp decline in market sentiment, Bitwise analysts believe that the current landscape favors accumulation rather than retreat. Bitwise Director and Head of Research André Dragosch, Senior Researcher Max Shannon, and Research Analyst Ayush Tripathi stated in their weekly Crypto Assets market guide report that the recent pullback was primarily driven by external factors, including the renewed escalation of US-China trade tensions, which has triggered a general risk-averse sentiment in global markets.

The report mentioned that the record-breaking wave of futures liquidations intensified this pullback, with Bitcoin perpetual futures open interest plummeting by nearly $11 billion, “setting the largest drop in history.” Dragosch stated that this forced liquidation event has now “significantly exhausted the selling pressure,” laying the groundwork for a reverse buying window similar to the yen arbitrage liquidation in August 2024.

The case in August 2024 provides a strong historical reference. At that time, the sudden interest rate hike by the Bank of Japan triggered massive liquidation of yen carry trades, causing Bitcoin to fall from $62,000 to $49,000 within a few days, a drop of over 20%. The Crypto Assets fear index also fell to 26 at that time, very close to current levels. However, within two weeks after the peak of the panic, Bitcoin quickly rebounded to above $60,000, bringing over 20% returns to investors who bought at the bottom.

“Our internal Crypto Assets sentiment index has fallen to its lowest level since that time,” Dragosch stated, adding, “Historically, such extreme conditions mark a favorable entry point before the seasonal strength of the fourth quarter.” The fourth quarter has historically been the strongest period for Bitcoin, with data from 2013 to 2024 showing that Q4 has an average increase of over 30%, far exceeding other quarters.

Bitwise's argument is based on three core logics. First, the selling pressure has been fully released through liquidation events, and the market is no longer accumulating excessive leverage. Second, external macro factors (such as trade wars) often have a short-term impact on Bitcoin; once the panic subsides, prices typically recover quickly. Third, when the encryption panic index is at an extremely low level, the market has often priced in the worst-case scenario, and any positive news could trigger a strong rebound.

Small holders accumulate against the trend while miners sell off 5.7 billion

(Source: CryptoQuant)

On-chain data supports Bitwise's viewpoint. Glassnode reports that small Bitcoin holders with 1 to 1,000 BTC have recently increased their holdings, offsetting the decrease in purchasing volume among large holders. This pattern indicates that even with the Crypto Assets fear index at a low level and ongoing market volatility, the confidence of retail and mid-level investors has been revitalized.

The accumulation behavior of small holders has significant market implications. This group is often regarded as “smart money” because they have a deeper understanding of market cycles and tend to operate in reverse at bottom areas. During the bear market of 2022, it was this group that continued to buy when Bitcoin fell to 15,000 USD, ultimately reaping substantial returns in the rebound of 2023. The current accumulation behavior indicates that experienced Bitcoin investors find around 108,000 USD attractive.

However, the picture painted by other indicators is more complex. Data from CryptoQuant shows that since last Thursday, miners have deposited about 51,000 BTC into exchanges, worth over $5.7 billion, marking the largest inflow since July. Such activities typically precede selling pressure, as miners often transfer their holdings to exchanges to close positions or hedge.

There are multiple reasons for miners to sell off. First, although the price of Bitcoin has recently corrected, it is still far above the mining costs of most miners (around $60,000 to $80,000), which provides an incentive to take profits. Second, with the upcoming halving period, miners need to reserve cash to cope with the impact of reduced income. Third, energy costs and equipment depreciation pressures force some miners to regularly sell Bitcoin to maintain operations.

The accumulation of small holders and the sell-off by miners reflects the internal struggle within the market. As a continuous seller, miners' selling pressure must be absorbed by new buying to maintain price stability. The current sideways movement of Bitcoin around $110,000 suggests that the market is digesting this $5.7 billion in selling pressure. If the Crypto Assets fear index rises and buying strengthens, prices are expected to break through the current range; conversely, if the miners' sell-off continues and buying is insufficient, it may test lower support.

Long-term holders exit but institutional ETF takes over

Similarly, long-term holders may also be exiting their positions. Data shows that 265,715 BTC have been sold in the past 30 days, representing the largest monthly outflow since January 2025. The sell-off by long-term holders (defined as addresses holding for more than 155 days) is typically characteristic of the later stages of market cycles, indicating that early buyers are taking profits.

However, this sell-off did not trigger a price collapse; instead, Bitcoin remained stable at around $110,000, suggesting that institutional or ETF demand may be absorbing the excess supply. Spot ETF products like BlackRock's IBIT and Fidelity's FBTC experienced net outflows in October, but the scale was relatively moderate. More importantly, these ETFs provide traditional investors with a convenient buying channel, allowing institutional funds to enter the market counter-cyclically during periods of panic.

Overall, these opposing capital flows indicate that the market is shifting from capitulation-style declines to re-accumulation. The extreme low levels of the Crypto Assets fear index, the accumulation of small holders, and the relative stability of prices all point to the bullish fundamentals that Bitwise analysts believe are present in the fourth quarter. Historical experience shows that when multiple contrary indicators appear simultaneously, it often signals the formation of a mid-term bottom.

For investors, the current environment offers favorable buying opportunities with a beneficial risk-reward ratio. If the Crypto Assets panic index rises from 22 back to the neutral zone of 50, it typically corresponds to a price rebound of 10% to 20%. Combined with the seasonal factors of the fourth quarter and support from institutional demand, Bitwise has a reasonable basis for its optimistic outlook on the market.