Bitcoin, 'Neutral' After Fear Ends... Will a Bull Market Reopen After 108 Days?

▲ Bitcoin (BTC)/AI generated image

The cryptocurrency Fear & Greed Index has recovered to the neutral zone for the first time since January, indicating a rapid improvement in market sentiment. With Bitcoin (BTC) holding above $81,000, investor sentiment moving beyond extreme fear has emerged as a key variable in market trends.

Cointelegraph reported on May 5 that the cryptocurrency Fear & Greed Index reached 50 on Tuesday, entering the neutral zone for the first time since January 17. This marks the end of a 108-day period of negative sentiment. The index measures market sentiment based on volatility, momentum, trading volume, and social signals. A score below 25 indicates extreme fear, 26 to 49 signifies fear or a cautious position, and higher scores mean improved investor confidence.

The return to neutrality coincided with a rebound in the total cryptocurrency market capitalization. The total market cap increased by 5.45% in May and by 16.51% since March, expanding from $2.28 trillion to $2.66 trillion.

Cryptocurrency analyst Darkfost stated that sentiment is becoming more constructive as Bitcoin tests higher price levels. Darkfost added that a separate sentiment index, which measures from -100 to +100, has also entered the greed zone, explaining that investor confidence is improving, and there's a strong trend for investors to hold Bitcoin positions rather than liquidate them.

However, the fact that a similar improvement in sentiment in January was followed by a weakening of upward momentum remains a variable. Darkfost identified the current zone as a potential turning point, suggesting that future price movements could depend on changes in investor behavior.

Stablecoin outflows were presented as a factor that could limit upward momentum. According to CryptoQuant data, Binance's cumulative net stablecoin outflow has reached $11.8 billion since April 25. This indicator tracks the flow of stablecoins into and out of exchanges and is used to gauge immediate buying power available in the market.

Generally, net inflows indicate funds entering exchanges and are often associated with accumulation. Conversely, net outflows indicate funds leaving, which can reduce liquidity for spot cryptocurrency purchases. Recently, outflows exceeding $1.5 billion per day have continued over several trading days. In early April, Binance saw consistent inflows while Bitcoin rose from $74,000 to $78,000, but this trend has now reversed.

Market analyst Crazzyblockk explained that the previous accumulation of stablecoin holdings fueled the upward movement. The current outflow trend is a signal that the pool of funds available for short-term deployment has thinned, and it has been identified as a factor that could temper the bullish momentum of Bitcoin and other cryptocurrency assets.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*