Crypto analyst Lark Davis broke down in a recent video why the current Bitcoin selloff may be setting up for a sharp reversal rather than a deeper crash.
The Bitcoin fear and greed index hit a score of 5, its lowest reading ever. That is worse than both the FTX collapse and the Terra crash. Meanwhile, BlackRock’s IBIT ETF saw record volume during the selloff, suggesting large players were buying while retail was panic selling.
The S&P 500 put/call ratio spiked to its highest since the Liberation Day crash. Davis pointed out that when retail traders pile this heavily into shorts, market makers rarely let those bets pay off. A short squeeze is the more likely outcome.
Funding rates across major crypto exchanges have dropped into deep negative territory, last seen in August 2024. That period marked a major bottom. Bitcoin rallied roughly 83% over the next four months.
One analyst cited by Davis summed it up: “Lows are in. We are buyers. Let’s effing go.”
Bitcoin’s weekly MACD has dropped to its lowest level ever. The weekly RSI is nearing oversold, and the last time it hit this zone was June 2022, what Davis called the “real” bear market bottom before FTX pushed prices roughly 30% lower.
BTC is holding above the 200-week EMA around $68,000. Davis entered long at $69K, targeting $74K at the 20-day EMA.
Altcoin dominance (excluding BTC) confirmed a monthly MACD bullish crossover with a major trend breakout. Davis compared the current setup to 2019-2020, not 2022.
He was upfront about the risk. Similar bullish alt signals have shown up over the past year without leading anywhere.
“Either alts are just generationally cooked and literally never coming back… or there is a massive opportunity here,” he said.
One-third of the most-searched altcoins on CoinGecko are AI-related, including Tensor, Venice, Virtuals, and Near. But token prices keep falling even as revenue grows. Virtuals is down 46% in 30 days while its OpenClaw ecosystem fees continue scaling.
Davis called this a clear gap between what these projects are building and how the market is pricing them right now.
The selloff stems from extreme fear, heavy retail shorting, and market volatility, while institutional buying suggests a potential rebound.
Yes, historically it often is. The index recently hit a score of 5, which is the lowest reading ever recorded—even lower than during the FTX collapse. When fear reaches these extreme levels, it frequently signals that a market bottom is near and a reversal could be imminent.
Altcoin dominance recently broke out with bullish signals, hinting at potential gains, but risk remains high due to past false signals.
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