Below, Cointelegraph presents several indicators that contrarian-minded investors can use to spot the opportune times to open positions before the next market rally.
1. The “fear index”
The Crypto Fear and Greed Index is a well-known metric of market sentiment that is used by most investors to predict the near future of prices. Taken purely at face value, an extreme fear reading like current sentiment is a signal to stay out of the market and preserve capital. The index can be used as a market indicator. One of the main factors that can help the index rise is an increase in price.
For this test, an index score of 10 was chosen for the low threshold, while scores of 35, 50, and 65 were chosen as the selling points. Although the market may continue to decline in the short term, history indicates that both the price and the index will eventually rise above their current levels, presenting a potential investment opportunity for contrarian traders.
2. Accumulation of whale wallets
Keeping a close eye on Bitcoin whale wallet activity with a balance greater than 10,000 BTC is another indicator of when buying opportunities arise. A detailed analysis of the last three months shows that, while the market has continued to sell off, the number of wallets with more than 10,000 BTC has been increasing.
The number of whale wallets of this size is now at its highest level since February 2021, when Bitcoin was trading above $57,000, and these wallets were selling strongly near the market high. While many analysts on Crypto Twitter are calling for another 30%+ drop in BTC price, whale wallets are betting on a positive future.
3. When the price of BTC falls below its cost of production
Another metric that can provide insight into when and where to buy is the average Bitcoin mining cost, which is the amount of money it costs a miner to mine one BTC.
The Bitcoin price has traded at or above the cost of production for most of the time since 2017, indicating that the metric is a good indicator of when generational buying opportunities arise.
A current example shows that the average cost of mining stands at $27,644, about $2,000 below the current price of BTC.
Bitcoin mining difficulty has also recently reached a new all-time high, and the market continues to see an upward trend as more industrial-sized mining operations get underway. This means that the average cost of mining is unlikely to see a significant drop in the short term.
Source: Ambito
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