Structural Opportunities in Extreme Fear: Bitcoin's $68,000 Battle and Hedging Strategies

As of midday February 22, 2026, the cryptocurrency market is at the bottom of an "extreme fear" sentiment. Bitcoin is fluctuating between 67,970 and 68,014, with a slight 0.21% increase over 24 hours, but it has retraced over 40% from its all-time high. The Fear and Greed Index reads only 9, indicating retail investors' panic has reached an extreme level. However, in stark contrast to retail panic, institutional funds are quietly accumulating—spot Bitcoin ETFs recorded a net inflow of $88 million on February 20, with BlackRock and Fidelity continuing to increase their holdings. This classic divergence of "retail panic, institutional greed" often signals that a mid-term bottom is forming.

Core Event-Driven Analysis

Macro Policy Double Play

The Supreme Court's ruling on tariffs on February 20 was interpreted by the market as a potential positive for fiscal stimulus, supporting risk assets. However, the Trump administration's ongoing policy of raising global tariffs from 10% to 15% continues to exert pressure on risk assets. This tug-of-war at the policy level causes a lack of market direction—Bitcoin's narrative as "digital gold" is being tested. While traditional gold hits new highs, Bitcoin has failed to keep pace, raising questions about its role as a "digital safe haven."

Derivatives Market Structure Fragility

The current rebound is mainly driven by short covering rather than new long positions, indicating weak upward momentum. Technically, Bitcoin has been trading within a descending channel since early February, with the 50-day moving average near 65,000 providing key support, while the 70,000 psychological level acts as a strong resistance. The Relative Strength Index (RSI) is at a neutral 52, showing no overbought or oversold signals—neither a rebound from oversold conditions nor a correction from overbought levels. The market is at a critical juncture for direction.

Narrative Crisis and Identity Rebuilding

Bitcoin faces an unprecedented identity crisis: underperforming physical gold as "digital gold," being replaced as a "payment method" by stablecoins, and competing as a "speculative tool" in prediction markets. This collapse of narratives is more damaging than price retracement because it shakes the long-term believers' confidence. However, historical experience suggests that when market consensus is extremely pessimistic, it often presents an opportunity for value redefinition.

Technical Deep Dive

Bitcoin's current price of 68,000 is at a critical technical level: the lower boundary of the 2/8 Murray line at 62,500, below which it could drop to 56,250; the upside requires breaking through the upper boundary of the 69,000 descending channel and the 21-day moving average at 67,700 to open the path toward 75,000 (4/8 Murray line). Ethereum is relatively resilient, currently trading at 1,973, up 0.58% over 24 hours. The MACD line has crossed above the signal line, forming a bullish crossover. If the DeFi ecosystem recovers, it may challenge the 3,000 level in the medium term.

Notably, market volatility has fallen to its lowest level in nearly a year. Large options traders continue to sell short-term and medium-term call options, while put options trading has shrunk, indicating diminishing fear of downside. However, expectations for upside are also lacking. This "low volatility + low expectation" combination often precedes a major market move.

Operational Strategies and Risk Management

Spot Allocation Strategy

Based on your previous framework of "30%-40% in gold as a risk control anchor," it is recommended to maintain the core position at this stage, viewing Bitcoin as a long-term strategic asset rather than a trading chip. For investors who have not yet built a position, a phased bottom-fishing approach is advised: establish an initial 30% position in the 65,000-68,000 range; if it falls below 62,500, add 40%; the remaining 30% should be kept as "black swan" ammunition for extreme scenarios (below 56,000).

Derivatives Trading Guidance

Short-term traders can watch for breakout opportunities between 67,700 and 69,000: if the 4-hour closing price stabilizes above 69,000, consider a small long position targeting 72,000-75,000 with a stop loss at 67,500; if a rebound near 69,000 is resisted and prices fall back, consider shorting with targets of 65,000-62,500 and a stop loss at 70,200. Given the current low volatility, options strategies such as selling wide strangles can be considered to profit from time decay, but strict delta hedging is necessary.

Risk Alerts

Be aware of two major risks: first, the escalation of global tariff wars leading to liquidity tightening and indiscriminate sell-offs in risk assets; second, sudden regulatory policy changes in cryptocurrencies. The current total market cap is $2.40 trillion, with Bitcoin dominance at 56.54%. If macro conditions worsen, Bitcoin's relative resilience may re-emerge. It is advisable to maintain at least 40% in cash or gold equivalents to avoid forced liquidation during extreme volatility.

The market is at the crossroads of "darkest hour" and "dawn." The convergence of the extreme fear index, institutional fund inflows, and technical support levels suggests a high risk-reward ratio in this zone. However, resolving the narrative crisis will take time. Investors should remain patient, avoid leverage, and adhere to the long-term principle of "trading time for space." Remember: in the crypto market, surviving longer is more important than earning quickly.

Disclaimer: The above analysis is based on publicly available information and does not constitute investment advice. Cryptocurrency markets are highly volatile; please make decisions cautiously according to your risk tolerance.