Matrixport Research: Bitcoin has entered an extreme fear zone, a short-term rebound may occur, but medium-term pressure is still accumulating

Recent Bitcoin sentiment has fallen into an extremely fearful range, rarely seen in nearly a decade. On the surface, this extreme pessimism is often viewed as a signal of a temporary bottom, but deeper data indicates that the current downward structure has not yet concluded. In particular, changes in ETF holdings, the Federal Reserve's hawkish stance, and the passive, almost mechanical rebalancing and reduction behaviors exhibited by institutions under loss pressure are becoming the core factors suppressing the market. Although there are conditions for a short-term rebound, medium-term risks cannot be ignored.

Short-term rebound conditions are forming, but deeper risks still exist

On-chain sentiment models and technical indicators have both dropped to extreme levels. The self-built greed and fear index has retreated to near the lower bound of the measurement range, and the 20-day moving average is close to the lowest 10% area. Historically, such readings are usually accompanied by a rebound window lasting from several days to weeks.

However, unlike the last rebound, the triggering factors for this downturn still exist. Key indicators that issued warnings in October have not truly reversed, and some signals have even diverged from prices, indicating that market structural issues remain unresolved. Sentiment can hit a bottom, but an effective reversal of the trend requires stronger macro support, which is not currently evident.

ETFs are the main cause of this downturn, and the Federal Reserve's hawkish stance reinforces medium-term pressure

Compared to sentiment, changes in ETF holdings are the key factors determining recent market conditions. Since the last FOMC meeting, Bitcoin and Ethereum ETFs have seen outflows of approximately $4.1 billion and $2.1 billion, respectively, with the heavy allocation this year placing most institutions in a loss position. Due to the highly "mechanical" nature of these investors' portfolio rebalancing behaviors, continued reduction during periods of policy uncertainty is an expected outcome, prolonging the market's structural selling pressure.

The macro environment is also leaning towards unfavorable conditions. The Federal Reserve's latest meeting minutes have conveyed a clearer hawkish inclination, with December rate cut expectations plummeting from 90% to 30%. Officials generally believe there is no need to relax policies quickly and are concerned that an AI-driven market may overheat. Coupled with a robust labor market, there is a lack of realistic basis for short-term easing. Even if there are marginal improvements in policy in the future, they are more likely to occur before early 2026 rather than at the current moment.

Overall, Bitcoin has entered an extremely fearful range, with short-term potential for a sentiment and technical-driven rebound, but medium-term pressures still stem from deeper structural issues: ETF outflows, uncertainty in Federal Reserve policy, and institutions' ongoing rebalancing under loss conditions. Short-term traders may seek opportunities in the rebound window, but a trend-driven upward movement still requires a warming macro environment. Truly decisive positive catalysts may not gradually emerge until early 2026.

The above viewpoints are derived from Matrix on Target. Contact us for the complete report from Matrix on Target.

Disclaimer: The market carries risks, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided herein.