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Contrarian Bitcoin Investors Identify Buy Zones Even as Extreme Fear Sweeps the Market

Bitcoin (BTC) support at the $30,000 level has proved quite resilient amid the turmoil of the past two weeks, with many tokens in the top 100 now showing signs of consolidation after prices bounced off their recent lows.

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Fear and Greed Index. Source: Alternative.me

With high volatility and sell-offs, it’s difficult to take a different view, and traders might consider stepping back from all the noise and negative news to focus on their core beliefs and reason for initially investing in Bitcoin.

Multiple data points suggest Bitcoin could be nearing a bottom, which is likely to be followed by an extended period of consolidation. Let’s see what experts say.

BTC may already have reached “maximum pain”.

The surge in realized losses by bitcoin holders was addressed by “Root,” a pseudonymous analyst, who tweeted the following diagram and said realized losses “reach bear market highs.”

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Bitcoin realized gains/losses. Source: Twitter

While previous bear markets have seen higher levels of realized losses than currently, they also suggest that the pain may soon subside, which would allow Bitcoin to embark on the slow path of recovery.

Analysts have also pointed out that “Bitcoin’s RSI is now entering a phase that has historically preceded outsized returns for long-term investors.”

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BTC/USD RSI. Source: Twitter

According to Rekt Capital,

“Previous reversals from this area include January 2015, December 2018 and March 2020. All bear market bottoms.”

Strong hands hold on

Additional on-chain evidence that Bitcoin could see a revival soon was provided by Jurrien Timmer, Global Director of Macro at Fidelity. According to Bitcoin Dormancy Flow, a metric showing dormant flow for Bitcoin, which is “roughly a measure of strong vs. weak hands.”

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Bitcoin quiescent flow. Source: Twitter

Tim said

“Glassnode’s entity-adjusted quiescent current is now at its lowest since the 2014 and 2018 lows.”

One metric that suggests the weak hands may be on the verge of capitulation is the Advanced NVT signal, which looks at network value-to-trade ratio (NVT) and includes standard deviation (SD) bands to determine when Bitcoin is overbought or oversold.

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Extended NVT signal. Source: LookIntoBitcoin

As shown in the chart above, the advanced NVT signal highlighted in light blue is now more than 1.2 standard deviations below the mean, suggesting that Bitcoin is currently oversold.

Previous instances of the NVT signal falling below the -1.2 SD level have been followed by price increases for BTC, although it can sometimes take several months to manifest.

Related: Bitcoin price predictions abound as traders focus on the next BTC halving cycle

The hash rate hits a new all-time high

Aside from complex on-chain metrics, there are several other factors that suggest Bitcoin could gain momentum in the near future.

Data from Glassnode shows that the hash rate for the Bitcoin network is now at an all-time high, suggesting that investment in mining infrastructure has increased significantly, with the greatest growth being in the United States.

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Bitcoin means hash rate vs. BTC price. Source: Glassnode

Based on the chart above, BTC’s price has historically moved higher in tandem with an increase in the average hash rate, suggesting that BTC could start an uptrend soon.

A final bit of hope can be found by looking at Google Trends data for Bitcoin, which shows an increase in search interest following the recent market downturn.

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Interest in finding bitcoin over time. Source: Google Trends

Previous spikes in Google search interest have largely coincided with a surge in Bitcoin’s price, making it possible that BTC could at least see a bounce of relief in the near future if sidelined investors see this as an opportunity to snag some satoshis at a discount .

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.