Crypto crash nearing exhaustion? Key signals pointing to the next bull run
The latest sharp sell-off in digital assets has shaken confidence across the market. Bitcoin has slid back to the crucial support area near $80,000, while the total value of all cryptocurrencies has dropped to around $2.90 trillion. Major altcoins have been hit even harder, with Ethereum, Ripple, Binance Coin, Cardano and many others losing more than 12% in just a week.
Yet, the deeper the pullback, the more signs appear that this downturn may be entering its final phase. Several indicators that have preceded previous trend reversals are now flashing at the same time, suggesting that the foundations for the next bull leg could already be forming beneath the surface.
Fear and Greed Index sinks to extreme fear
One of the clearest signals comes from the widely followed Crypto Fear and Greed Index, which has slumped to a year-to-date low of 10 — firmly in the “extreme fear” zone. This collapse reflects fading momentum, elevated volatility and overwhelmingly negative sentiment across social platforms and trading desks.
Historically, such extreme fear readings have often marked the late stages of a downturn rather than its beginning. In previous cycles, strong rallies in Bitcoin and the wider market frequently emerged only weeks after the index hit similar depressed levels. Earlier this year, for instance, Bitcoin went on to print a new all-time high in May, shortly after market sentiment plunged into extreme fear.
In contrast, extended bull markets and subsequent blow-off tops have tended to form when the index lingered in the “greed” or “extreme greed” band. That pattern has repeated multiple times: optimism peaks, leverage soars, the index flashes greed, and soon after a painful correction follows.
With the current reading deeply in the red and the calendar inching toward year-end, there is a reasonable chance that December could bring a more constructive phase for crypto. Seasonality also plays a role: the so‑called “Santa Claus rally” in traditional markets sometimes spills over into digital assets as risk appetite returns.
Market-wide oversold conditions
Beyond sentiment, technical indicators are also signaling that the sell-off may be overextended. The Relative Strength Index (RSI) for the total crypto market capitalization has fallen to about 24, a level conventionally defined as “oversold.” Put simply, prices have dropped so quickly that the downside momentum itself may be unsustainable.
This collapse in RSI suggests that the multi‑month downward divergence pattern, which started to develop around July, is approaching exhaustion. When an entire asset class becomes that oversold, even modest shifts in news or liquidity can trigger sharp counter‑trend moves.
It does not mean that prices will move up in a straight line. A more realistic scenario is a choppy bottoming process, potentially including the formation of classical reversal structures such as a double bottom or an inverse head‑and‑shoulders pattern. Those formations often take weeks to complete but tend to precede more durable uptrends when confirmed with rising volume and improving momentum.
“Cleansing” through leverage reduction
Another factor hinting that the worst of the crash may be behind us is the ongoing “cleansing” of excess leverage from the system. One way to track this is through futures open interest, which measures the total value of outstanding derivative positions.
Recent data show that aggregate futures open interest across major exchanges has plunged to around $123 billion, down dramatically from more than $320 billion earlier in the year. At the same time, total liquidations since October 10 have exceeded $40 billion, as overleveraged long and short positions were forcibly unwound.
While painful for traders caught on the wrong side, this wave of liquidations tends to make the market structurally healthier. With less borrowed money amplifying every move, price swings can become more grounded in actual spot demand rather than purely speculative leverage. Historically, substantial reductions in open interest have often occurred near macro bottoms, when weak hands are flushed out and stronger, longer‑term participants step in.
Macro tailwinds: interest rates and liquidity
Looking beyond crypto‑specific indicators, broader macroeconomic conditions may also turn more supportive. The probability of interest rate cuts by the US Federal Reserve over the coming quarters has risen as growth concerns increase and inflation shows signs of moderation. Lower rates typically benefit risk assets by reducing the attractiveness of cash and government bonds while stimulating borrowing and investment.
Additionally, the global money supply, as represented by measures like M2, has been edging higher again. Expanding liquidity tends to provide fuel for speculative assets, including cryptocurrencies, as investors search for higher returns. In earlier cycles, phases of rapid money supply growth have often overlapped with powerful bull runs in digital assets.
Structural drivers: ETFs and institutional access
Another pillar of the bullish thesis lies in the continued institutionalization of crypto. A growing number of exchange‑traded products targeting various digital assets, especially altcoins, are either being launched or inching closer to regulatory approval in key markets.
These vehicles give traditional investors, from family offices to large asset managers, a compliant and familiar way to gain exposure without directly holding tokens or navigating on‑chain infrastructure. Every new product potentially opens the door to fresh capital inflows, and over time this pipeline can meaningfully alter the demand side of the equation.
As more jurisdictions clarify their stance on spot and futures‑based crypto products, the asset class becomes less fringe and more embedded in the mainstream financial system. That doesn’t eliminate volatility, but it does raise the ceiling of how much capital can eventually flow into the space.
Why extreme pessimism often precedes recoveries
Psychology plays a central role in every crypto cycle. During the late stages of a downturn, media narratives turn overwhelmingly bearish, long‑term promises are questioned, and even committed holders begin to doubt their convictions. This is when capitulation tends to occur: investors sell not because they have carefully reassessed fundamentals, but because emotionally they can no longer tolerate the pain.
Paradoxically, this is also when risk‑reward often starts to improve. As pessimism maxes out, valuations compress, leverage shrinks, and expectations become so low that even slightly positive news can surprise to the upside. In previous major drawdowns, some of the best entry points emerged when sentiment was at its bleakest.
This doesn’t guarantee that “this time” will follow the same script, but it highlights why relying solely on current mood can be misleading. Objective indicators like the Fear and Greed Index, RSI, and open interest help counterbalance emotional bias by putting numbers on what many participants are feeling.
How a new bull phase could unfold
If the current crash is indeed nearing its end, the next bull phase will likely progress in stages rather than explode overnight. Historically, recoveries often begin with Bitcoin stabilizing and reclaiming key support zones, as the largest and most liquid asset tends to attract early inflows.
Once confidence in Bitcoin’s stability grows, capital usually starts rotating into large‑cap altcoins such as Ethereum, followed by mid‑caps and eventually more speculative tokens. This “capital rotation” can create the impression of a synchronized rally, but underneath the surface different segments of the market often peak at different times.
Traders should also be prepared for sharp counter‑trend rallies within an ongoing bottoming process. Dead‑cat bounces and retests of previous lows are common. What distinguishes a genuine trend reversal from a temporary relief rally is sustained higher lows, decreasing selling volume on pullbacks, and improving on‑chain and derivatives data.
Risk management in a post‑crash environment
Even if the conditions for a new bull market are forming, managing risk remains crucial. Highly volatile environments can generate both outsized gains and severe drawdowns. Rather than trying to perfectly time the bottom, many experienced participants prefer to scale in gradually, spreading entries over days or weeks.
Diversification also becomes more important. Concentrating a portfolio in a single narrative or token can be tempting during euphoric phases but often proves risky after a crash, when correlations are unstable and individual projects may fail to recover. Evaluating fundamentals — such as real‑world adoption, developer activity, token economics, and treasury health — can help distinguish resilient projects from purely speculative bets.
In addition, monitoring leverage metrics, funding rates, and open interest can offer clues about when the market is becoming overheated again. A new bull run, if it materializes, will eventually attract excessive speculation; being able to identify that inflection can help investors lock in gains before the next major correction.
Long‑term perspective: cycles within a structural trend
It is also helpful to contextualize the current crash within the broader history of digital assets. Crypto has repeatedly moved in pronounced boom‑and‑bust cycles, often tied to macro liquidity shifts, regulatory developments, and technological milestones such as halving events or major protocol upgrades.
Despite multiple deep drawdowns, the long‑term trajectory of the asset class has remained upward as infrastructure improves, institutional participation grows, and new use cases emerge. From payments and remittances to decentralized finance, gaming, and tokenization of real‑world assets, the ecosystem continues to expand in both breadth and complexity.
For long‑term participants, the key question is not whether another bear market will occur — it almost certainly will — but whether the underlying adoption curve continues to slope upward over years and decades. Viewed through that lens, crashes can be seen less as terminal events and more as periodic resets that clear excesses and reprice risk.
What investors should watch next
Over the coming weeks and months, several data points will help confirm whether the current downturn is truly bottoming:
– The behavior of the Fear and Greed Index: sustained movement out of extreme fear without quickly snapping back into greed would signal a healthier sentiment reset.
– RSI for Bitcoin and the total market cap: a climb from oversold territory accompanied by higher lows in price would strengthen the reversal case.
– Futures open interest and funding rates: stabilizing or slowly rising open interest, without excessive positive funding, would indicate healthier, less leveraged participation.
– On‑chain activity: increases in active addresses, transaction volumes, and long‑term holder accumulation would suggest genuine demand rather than purely speculative spikes.
– Macro signals: clearer guidance on interest rate trajectories and global liquidity conditions will shape the broader risk environment.
Individually, none of these indicators can predict the future with certainty. Taken together, however, they form a coherent picture. Right now, many of them are aligned in a way that has historically preceded the end of major crypto downturns.
Bottom line
Bitcoin’s drop toward $80,000, the steep decline in total market capitalization, and double‑digit losses across altcoins have reinforced the perception of a deepening crisis. Yet beneath this surface turmoil, critical indicators are flashing that the sell‑off may be in its late stages: extreme fear readings, oversold technicals, a sharp contraction in leverage, improving odds of monetary easing, and a steady march toward broader institutional access.
A new bull run is not guaranteed, and the path forward is unlikely to be smooth. However, for those willing to look past the immediate fear, the current environment increasingly resembles the kind of reset from which previous powerful uptrends have emerged.