Retail Mood Sours Amid Crypto Selloff, Flashing Short-Term Bottom Signals for BTC, ETH, XRP

Social sentiment around the major cryptocurrencies has deteriorated sharply in recent days as prices continue to grind lower, according to Santiment. Traders have turned decidedly defensive. This kind of market fatigue typically appears near inflection points and not necessarily at the start of new downtrends. "Bitcoin has dumped below $100K for the second time this month," the firm noted. Predictably, this has led to a wave of FUD (Fear, Uncertainty, and Doubt) and heightened concerns among retail traders. Santiment observed that Bitcoin sentiment screens are unusually flat, Ethereum's skew is marginally positive, and XRP shows one of its most fear-heavy readings of the year.

Historically, when retail sentiment flips negative across multiple large-cap assets at once, capitulation tends to follow. This effectively clears out weaker hands and resets the market for bigger players. Onchain indicators support an outlook for a potential bottoming. Bitcoin's Net Unrealized Profit (NUP) ratio has dropped to 0.476 as of this week, which is a level that has historically triggered short-term market bottoms. Previous instances of this reading have been followed by double-digit percentage rallies, highlighting the possibility of an imminent rebound, according to CoinDesk.

The broader crypto market continues to suffer, with total crypto capitalization dropping toward $3.47 trillion, extending a month-long downtrend. FxPro analyst Alex Kuptsikevich pointed out that while short-term attempts to form a bottom are observable, rallies are met with heavy selling pressure. This creates a medium-term correction pattern rather than a structural break in the cycle. For example, Bitcoin slid toward $102,500 earlier this week and is currently trading near $98,000, resulting in significant realized losses among wallets that purchased at around $110,000.

Despite recent market struggles, institutional positioning leans cautiously bullish by year’s end. Sygnum’s survey revealed that 61% of institutions plan to increase their crypto exposure, partially driven by anticipated altcoin ETF launches and regulatory developments in 2026. Additionally, strategic buying continues to bolster the market. For instance, Strategy, one of Bitcoin's largest holders, accumulated 487 BTC at an average price of $102,557, bringing its total to 641,692 BTC this past week.

On the Ethereum front, exchange reserves have dropped to their lowest level since May 2024. This reduction suggests a medium-term positive trend, as it typically indicates accumulation by investors rather than distribution. Combined with institutional purchases, falling exchange balances reflect a stacking-up of conditions favorable for a reflexive rebound.

Although retail traders are stepping back, larger players seem to be preparing for the next growth phase. Negative sentiment, long-liquidation clusters, and sustained institutional buying activity are all elements that have historically preceded sharp, short-term market rebounds rather than deeper corrections. The ingredients for recovery are increasingly evident, suggesting that a reflexive bounce could be imminent if these trends persist.