The atmosphere of deep fear that has been in effect in the cryptocurrency market for weeks is slowly giving way to cautious optimism. Market sentiment, which has been near the lowest levels for about 18 days, has left the “extreme fear” zone for the first time and signaled recovery. Crypto Fear & Greed Index, one of the common indicators measuring investor psychology, rose to the “fear” level with 28 points on Saturday. This value was recorded as the day when the index did not produce “extreme fear” for the first time since November 10.
Is Extreme Fear Really a Bottom Signal?
“Extreme fear” data is known to often coincide with local bottoms in past market cycles. In mid-November, many analysts noted that the index had fallen to the most pessimistic levels seen in the current cycle. Some commentators interpreted this chart as Bitcoin 
$90,846.46 He described it as a “maximum pain” scenario in terms of dominance. In fact, in the evaluations made a few days later, it was stated that even the definition of “extreme fear” underestimated the current market mood.
Another prominent opinion in this process came from crypto trader Nicola Duke. According to Duke, each occurrence of “extreme fear” in the index usually signals a local bottom for Bitcoin. In other words, the moments when the market is most pessimistic often create important buying opportunities for long-term investors. Current data also point out that this historical similarity has come to the fore again.
There are other indicators that support the partial recovery in sentiment in recent days. Santiment, which provides on-chain and social media analysis, reported that overall social media sentiment is “predominantly bullish” after Bitcoin approached the $92,000 level again. According to the data shared by the platform, there is a visible increase in the ratio of positive to negative posts. This indicates that small investors are starting to show interest in the market again, despite the sharp fluctuations.
Risk Appetite Still Limited, Bitcoin Season Continues
However, it is emphasized that it is too early to talk about a strong risk-taking tendency in the market as a whole. CoinMarketCap Altcoin Season Index, which provides important data in terms of Altcoin-Bitcoin balance, clearly shows that we are in the “Bitcoin season” with 22 points out of 100. This data reveals that investors are still largely focused on Bitcoin and approach altcoins cautiously.
On the other hand, macroeconomic expectations also play an important role behind this limited recovery in sentiment. Increasing recession concerns, especially on a global scale, directly affect investors’ approach to risky assets. Bitwise Europe Research Director Andre Dragosch argued that the Bitcoin price was “mispriced” due to expectations about the global economic outlook, and said that the possibility of an upcoming recession was still not taken into account sufficiently. Dragosch emphasized that the current risk-return balance is highly asymmetrical, comparing it to the extraordinary market conditions during the COVID period.
In addition to this picture, the recent resumption of limited inflows into US-based spot Bitcoin ETFs was interpreted as a sign of a cautious return of confidence in the market. This development, which shows that institutional investors have not completely turned off their risk appetite, stands out as another factor supporting the recovery in sentiment.
