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

▲ Bitcoin (BTC)/AI Generated Image

The crypto 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, having moved past extreme fear, has emerged as a key variable in market trends.

Cointelegraph reported on May 5 that the crypto 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. Below 25 indicates extreme fear, 26 to 49 signifies fear or a cautious position, and higher numbers indicate improved investor confidence.

The recovery to neutral coincided with a rebound in the total cryptocurrency market capitalization. The total market cap increased by 5.45% in May alone. Since March, it has grown by 16.51%, expanding from $2.28 trillion to $2.66 trillion.

Crypto analyst Darkfost stated that sentiment is becoming more constructive as Bitcoin tests higher price levels. Darkfost explained that a separate sentiment index, which measures from -100 to +100, has also entered the greed zone, indicating improved investor confidence and a stronger trend of holding Bitcoin positions rather than liquidating them.

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

Stablecoin outflows have been presented as a factor that could limit upward momentum. According to CryptoQuant data, Binance's net stablecoin outflow has accumulated to $11.8 billion since April 25. This metric tracks the flow of stablecoins entering and exiting exchanges and is used to gauge the immediate buying power available in the market.

Generally, net inflows indicate funds entering exchanges and are often linked to accumulation. Conversely, net outflows represent funds leaving, which can reduce liquidity for spot crypto purchases. Recently, outflows exceeding $1.5 billion per day have continued for several trading days. In early April, Binance saw consistent inflows while Bitcoin rose from $74,000 to $78,000, but that 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 sign that the pool of deployable funds has thinned in the short term and has been identified as a factor that could temper the bullish momentum of Bitcoin and other crypto 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.*