Extreme Fear Could Signal a Reversal After Heavy Liquidations
Cryptocurrency markets are showing some of their ugliest charts in months, but that could be a contrarian bullish signal, according to macro analyst Alex Krüger.
“Most crypto charts now look so broken and bearish that it’s bullish,” Krüger wrote on X, suggesting that panic selling and forced liquidations may have cleared out excess leverage, paving the way for a potential rebound.
Long Liquidations Flush Out Leverage
Recent price action saw Bitcoin (BTC) drop to around $108,803 and Ethereum (ETH) dip below short-term support levels. Krüger noted that long liquidations have been significant, particularly in the latest two waves after market close. These cascades occur when leveraged positions are automatically closed by exchanges, intensifying the downside.
However, this process often resets leverage in the system, which can stabilize markets and set the stage for a reversal once selling pressure dries up.
Options Market Shows Extreme Fear
Krüger also pointed out that puts are far more expensive than calls, highlighting heavy defensive positioning. In derivatives markets, this skew toward downside protection typically signals fear. For contrarian traders, such one-sided sentiment is often seen near market bottoms.
Interestingly, while Bitcoin and Ethereum absorbed most of the selling, altcoins stopped crashing earlier, showing relative resilience. Krüger believes this divergence can be an early indicator of upcoming strength in the broader market.
FOMC Meeting Could Be the Key Catalyst
Despite his short-term bullish stance, Krüger expects major trends to remain muted until after the Federal Reserve’s September policy meeting. The FOMC decision on Sept. 17 is widely expected to include an interest rate cut, which could inject liquidity and boost demand for risk assets like crypto.
“This is not the end of the cycle,” Krüger emphasized, though he doesn’t foresee the euphoric peaks of previous bull runs. One possible outlier, he says, is Solana (SOL), which continues to attract capital from decentralized treasuries building on its network.
For now, Krüger’s message is clear: when charts look the worst and fear dominates, that’s often when opportunity begins.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.