Crypto market awaits extreme volatility after long exhaustion

The crypto market is in a phase of exhaustion, and this is clearly reflected in sentiment. According to analyst Joao Wedson, there is only one thing that will draw global attention back to crypto: massive volatility, both to the downside and to the upside. He is actively waiting for this and compares the expected move to the notorious Corona Dump of 2020.

Sentiment indicator shows historic exhaustion

The Alpha Crypto Sentiment Gauge from Alphractal paints a striking picture. The indicator, which displays market sentiment in categories ranging from “very bearish” to “very bullish”, is currently at a historic low. While the chart in previous bull runs regularly peaked in the green, the market now sits largely in negative territory. The Bitcoin price has been fluctuating around $63.000 recently, far removed from the peak of over $137.000 visible earlier on the chart.

This type of exhaustion is not new. In 2022 and early 2023, there were similar periods of persistently negative sentiment, followed by sharp price moves. The pattern suggests the market is gearing up for the next major move, although the direction remains uncertain.

Waiting for the next big shock

Wedson argues that the current situation calls for a shock move comparable to what the market experienced in March 2020. During the Corona Dump, Bitcoin lost more than 50% of its value in a short period, only to stage a spectacular recovery in the months that followed. That combination of extreme downside and upside volatility put the market back on the map.

It is striking that this sentiment is more widely shared in the crypto market. Recent data also shows that crypto funding rounds are falling sharply, indicating less risk appetite among investors. The market is searching for direction and waiting for a catalyst that will definitively turn sentiment around. Whether that catalyst will come from outside or from the market itself remains the big question.