Matrixport Research: Bitcoin Enters Extreme Fear Zone, Short-term Rebound Possible but Mid-term Pressure Continues to Accumulate

Recently, bitcoin sentiment has dropped into an extremely rare zone of extreme fear not seen in nearly a decade. On the surface, such extreme pessimism is often regarded as a signal of a cyclical bottom, but deeper data shows that this downward structure has not yet ended. In particular, ETF position changes, the Federal Reserve's hawkish stance, and institutions' passive, almost mechanical rebalancing and reduction of positions under loss pressure are becoming the core factors suppressing the market. Although there are conditions for a short-term rebound, medium-term risks remain significant.

Short-term rebound conditions are forming, but deep risks persist

On-chain sentiment models and technical indicators have both fallen to extreme levels. The self-developed Greed and Fear Index has dropped to near the lower end of its measurement range, and the 20-day moving average is close to the lowest 10% region. Historically, such readings are usually accompanied by a rebound window lasting several days to weeks.

However, unlike the previous rebound, the triggering factors for this round of decline still exist. The key indicators that issued warnings in October have not truly reversed, and some signals have even diverged from the price, indicating that market structural problems have not been resolved. Sentiment can bottom out, but an effective reversal of the trend requires stronger macro support, which is not currently evident.

ETF is the main cause of this round of decline, and the Federal Reserve's hawkish stance strengthens medium-term pressure

Compared to sentiment, ETF position changes are the key factor determining recent market trends. Since the last FOMC meeting, bitcoin and ethereum ETFs have seen outflows of about 4.1 billions USD and 2.1 billions USD, respectively. The heavy allocations made by most institutions this year have put them in a loss zone. Because the rebalancing behavior of these investors is highly "mechanical," continued position reduction during periods of policy uncertainty is an expected outcome, prolonging the market's structural selling pressure.

The macro environment is also unfavorable. The Federal Reserve released a clearer hawkish inclination in its latest meeting minutes, with expectations for a rate cut in December plunging from 90% to 30%. Officials generally believe there is no need to loosen policy quickly and are concerned that the AI-driven market may overheat. Coupled with a robust labor market, there is little realistic basis for short-term easing. Even if there is marginal improvement in policy in the future, it is more likely to occur before early 2026, rather than at this point in time.

Overall, bitcoin has entered an extreme fear zone. There is a possibility of a rebound driven by sentiment and technical factors in the short term, but medium-term pressure still comes from deeper structural issues: ETF outflows, Federal Reserve policy uncertainty, and continued institutional rebalancing under loss conditions. Short-term traders may find opportunities during the rebound window, but a sustained upward trend still requires a warmer macro environment. Truly decisive positive catalysts may not gradually emerge until early 2026.

Some of the above views are from Matrix on Target, contact us to obtain the full Matrix on Target report.