Is the post-CPI FUD creating another opportunity to buy the fear?
Santiment analysts seem to think so. According to their report, retailers are becoming extremely bearish with only 0.82 bullish comments for every bearish comment on Bitcoin. However, this level of pessimism could signal a contrarian buying opportunity, as extreme retail fear has historically been seen near market bottoms.
The timing is no coincidence. Retail optimism has been fading as the U.S economy continues to deal with sticky inflation. U.S headline CPI was up 0.4% in October compared to expectations of 0.3% and core CPI increased by 0.3% versus expectations of 0.2%. The result? A shift in market expectations.
As can be seen in the chart above, expectations for rate hikes have been rising quickly. For instance, the chances of a 50 basis point increase in December have risen to 11%, while there is an expectation of a 25 basis point increase of 84%. This puts the Fed’s December decision back in focus.
And, the concerns do not stop there. Peter Schiff has also commented on the concern around sustained inflation. He noted how the CPI increased by 0.4% in October, taking the total increase in 2026 to 4.15%, with two months still left in the year. If the trend continues, the inflation could increase to 5% by the end of the year, adding further pressure on the Fed to keep monetary policy tight.
This means that Bitcoin [BTC] may be recording a hike in retail pessimism, with the same coinciding with increasingly bearish macro outlooks. This can be seen as a positive for Santiment’s contrarian indicator, but will the heightened macro risk mean that it is too risky to “buy the dip?”
Santiment’s contrarian Bitcoin buying signal faces a reality check
The post-CPI reaction has triggered another crypto wipeout too.
Interestingly, there have been three instances of long liquidations above $500 million in under two weeks since November started. This alludes to huge waves of deleveraging in the market as traders get squeezed out of their longs. And yet, despite these leverage resets, there still seemed to be a prevalent bearish bias.
More importantly, on-chain data has been adding to the pressure. The supply of Tether has been shrinking at a much faster rate than when FTX collapsed.
Over the last 60 days, for instance, USDT’s market cap fell by $6.6 billion, more than double the amount it fell during December 2022. Meanwhile, as Bitcoin fell from $79,000 to $73,000 last week, large holders reduced their balances by more than 34,000 BTC, worth roughly $2.6 billion.
In essence, the market is not showing clear signs of contrarian buying just yet.
Instead, reduced liquidity and a lack of solid smart money accumulation suggested that this downtrend may not be indicative of the usual short-term to long-term holder transition phase. This would make retail pessimism a weaker bottom signal, especially as large holders continue to reduce their exposure.
Consequently, this puts Santiment’s contrarian indicator in question. Considering inflation worries, increasing December rate hike expectations, and weak on-chain indicators, the risk to reward on this Bitcoin dip could be unfavorable. Especially since the market could still be facing a deeper correction.
Final Summary
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Rising retail fear could create a Bitcoin buying opportunity, but inflation and rate-hike concerns are adding pressure.
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Falling liquidity, whale selling, and heavy long liquidations mean the market could face further downside.