Bitcoin (BTC) Posts Negligible Bounce, but Extreme Fear Suggests Larger Rebound in Store

The Crypto Fear & Greed Index has plunged to levels that previously have presaged a sizable move higher in bitcoin prices.

Bitcoin (BTC) showed negligible signs of recovery on Wednesday, but a key market sentiment indicator suggested that the world's largest cryptocurrency might be poised for a larger rebound.

Bitcoin was trading flat over the past 24 hours at around $58,000 by early U.S. hours. The token reached as low as $55,600 during the session. Ether was also largely unchanged, trading at around $4,100.

Among the top gainers were the native tokens of Solana (SOL), Near (NEAR) and the Internet Computer Protocol (ICP). These tokens outperformed the two largest cryptos and rose by between 2% and 4%.

Meanwhile, the Crypto Fear & Greed Index sank to as low as 26 out of 100 in the past few days. The metric, which gauges market enthusiasm towards bitcoin and other large cryptocurrencies, showed deep "fear" in the market.

A reading of zero on the index represents extreme fear, while 100 at the other end of the spectrum indicates extreme greed. The metric has offered several tactical long opportunities in recent months.

"With the recession fears reaching a fever pitch and crypto sentiment washed out, I believe we are at or very close to a tradable local bottom," Quinn Thompson, founder of digital asset hedge fund Lekker Capital, wrote in a Wednesday update.

Thompson noted that the U.S.-listed bitcoin ETFs on Tuesday saw their biggest daily outflow since May 1, which corresponded to a local bottom in bitcoin's price at $56,500. BTC then rebounded 27% in three weeks to $72,000.

"The Crypto Fear & Greed Index at 25 in early July offered a 32% return on BTC over three weeks to nearly $70k by the end of the month," Thompson added. "The index at 17 in early August offered a 32% return on BTC over three weeks to 65k.”

The longer term outlook for digital assets remained murky as growing concerns about the U.S. labor market and a potential recession coincide with the Federal Reserve's upcoming interest rate cuts.

Bitfinex analysts said bitcoin could fall to around $40,000-$50,000 in a bearish, recessionary scenario following the rate cuts.

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