Crypto sentiment hits extreme fear as dollar shorts hit record 

The cryptocurrency market is showing signs of deep pessimism, but some analysts say the same conditions that have weighed on prices could also be laying the groundwork for a recovery.

Analysts at Matrixport say their sentiment gauge has reached levels that historically mark “durable bottoms,” while Bank of America’s latest survey shows investors are the most underweight the dollar since early 2012.

A recent flip in bitcoin’s correlation with the dollar means either outcome could fuel volatility.

Sentiment points to a potential bottom

Matrixport said sentiment has fallen to “extremely depressed levels,” adding that its bitcoin fear and greed index tends to form durable lows when the 21-day moving average drops below zero and then turns higher, which it says is the current condition.

“This transition signals that selling pressure is becoming exhausted and that market conditions are beginning to stabilize,” the firm noted.

The firm cautioned prices could still fall further in the short run, but said historically such deep negative readings have offered attractive entry points.

Previous troughs in the metric appeared around June 2024 and November 2025 following sharp declines, according to Matrixport.

Alternative.me’s Fear and Greed Index also sits near its weakest since June 2022, with a reading of 10 out of 100 that indicates “extreme fear.”

Frank Holmes, chairman of bitcoin miner Hive, said bitcoin is roughly two standard deviations below its 20-day trading norm, a level seen only three times in the past five years.

He added that “such extremes have favored short-term bounces over the subsequent 20 trading days,” while stressing he remains constructive over the long term.

Record dollar bearishness could jolt BTC’s new correlation

Bank of America’s February survey shows investor positioning in the US dollar is the most negative since at least early 2012, with net exposure at a record underweight.

The shift reflects worries about a weakening US labor market and the prospect of Federal Reserve rate cuts, according to CoinDesk’s reporting.

Historically, a softer dollar has supported bitcoin by easing global financial conditions.

But since early 2025, bitcoin has developed a positive link with the dollar.

CoinDesk, citing TradingView, said the dollar index fell over 9% last year and another 1% this year, while bitcoin declined 6% in 2025 and is down 21% year to date.

Their 90-day correlation rose to 0.60 on Monday, the highest since April 2025.

If that relationship holds, a deeper dollar slide might not help bitcoin.

Conversely, a dollar rebound sparked by short covering could lift BTC.

“Record short positioning raises the risk of volatility in major USD pairs; downside may extend on weak US data, but crowded trade dynamics increase potential for sharp short-covering rallies,” said Eamonn Sheridan of InvestingLive.

If bitcoin ends lower in February, it would mark five consecutive monthly declines, the longest streak since 2018 and among the steepest sustained sell-offs on record, according to Cointelegraph.