The fear and greed index has fallen to its lowest level since Bitcoin traded for $17,000 in early 2023.
The sentiment metric, which is followed by a lot of people, reached extreme greed levels in March near the local peak of the cryptocurrency market. However, it is now pushing its limits in the opposite direction.
The Crypto Fear & Greed Index is a popular contrarian buy and sell indicator, but analysts warned that bitcoin's price could fall further.
According to Rachel Lin of SynFutures, Mt. Gox user refunds and sell pressure from seized BTC sales created a multibillion-dollar overhang.
According to Markus Thieled of 10x Research, Bitcoin could fall to $50,000 in the coming historically weak months, but a Fed interest rate cut in September could start a rally.
As bitcoin's (BTC) fall below $54,000 dragged down digital asset markets, investor sentiment plummeted to levels not seen since the end of the 2022 crypto winter.
Alternative.me, a data source, created the Crypto Fear & Greed Index, which shows market enthusiasm for bitcoin and other large cryptocurrencies. A score of 0 indicates extreme fear, and a score of 100 indicates extreme greed.
Friday saw the gauge plunge to 29 for the first time since early January 2023, when bitcoin was trading around $17,000 following the crushing bear market of 2022.
When the metric reached the 90 level in March, close to what turned out to be (so far) the 2024 top of the broader crypto market and bitcoin's all-time high of approximately $73,500, the metric notably sent out a contrarian sell signal. Since then, BTC and ether (ETH) have decreased by 25% to 30%, while major altcoins have lost approximately 50% and smaller tokens have lost even more.
Extreme fear may present buying opportunities, but the reality is more nuanced and requires consideration of a number of factors.
In a market update, Rachel Lin, CEO and co-founder of derivatives trading venue SynFutures, stated that the unloading of seized bitcoin by the German and U.S. governments and "preemptively selling" as the estate of the defunct Japanese exchange Mt. Gox began to refund investors this month were the primary causes of the downturn.
She stated that the pressure to sell is unlikely to ease anytime soon. According to data provided by blockchain tracing platform Arkham Intelligence, the Mt. Gox estate has assets worth more than $8 billion, the U.S. government has over $12 billion, and the German government still holds approximately $2.2 billion worth of Bitcoin.
Lin added, "The selling pressure from Mt. Gox users will determine the direction of bitcoin in the coming days."
She stated, "The market expects the majority of Mt. Gox users to dump their tokens, but if the selling is lower than expected, we might see a bounce back." On the other hand, we might soon be looking at the $50,000 level if there is sufficient selling to lower the price."
10x Research founder Markus Thielen lowered his price target from $55,000 to $50,000. In an email note, he said, "This situation may compel ETF holders and miners to liquidate more positions." He added that August and September have historically been "challenging months" for bitcoin. However, he added, "Bitcoin could see another rally attempt if the Federal Reserve cuts interest rates in September."
The sentiment metric, which is followed by a lot of people, reached extreme greed levels in March near the local peak of the cryptocurrency market. However, it is now pushing its limits in the opposite direction.
The Crypto Fear & Greed Index is a popular contrarian buy and sell indicator, but analysts warned that bitcoin's price could fall further.
According to Rachel Lin of SynFutures, Mt. Gox user refunds and sell pressure from seized BTC sales created a multibillion-dollar overhang.
According to Markus Thieled of 10x Research, Bitcoin could fall to $50,000 in the coming historically weak months, but a Fed interest rate cut in September could start a rally.
As bitcoin's (BTC) fall below $54,000 dragged down digital asset markets, investor sentiment plummeted to levels not seen since the end of the 2022 crypto winter.
Alternative.me, a data source, created the Crypto Fear & Greed Index, which shows market enthusiasm for bitcoin and other large cryptocurrencies. A score of 0 indicates extreme fear, and a score of 100 indicates extreme greed.
Friday saw the gauge plunge to 29 for the first time since early January 2023, when bitcoin was trading around $17,000 following the crushing bear market of 2022.
When the metric reached the 90 level in March, close to what turned out to be (so far) the 2024 top of the broader crypto market and bitcoin's all-time high of approximately $73,500, the metric notably sent out a contrarian sell signal. Since then, BTC and ether (ETH) have decreased by 25% to 30%, while major altcoins have lost approximately 50% and smaller tokens have lost even more.
Extreme fear may present buying opportunities, but the reality is more nuanced and requires consideration of a number of factors.
In a market update, Rachel Lin, CEO and co-founder of derivatives trading venue SynFutures, stated that the unloading of seized bitcoin by the German and U.S. governments and "preemptively selling" as the estate of the defunct Japanese exchange Mt. Gox began to refund investors this month were the primary causes of the downturn.
She stated that the pressure to sell is unlikely to ease anytime soon. According to data provided by blockchain tracing platform Arkham Intelligence, the Mt. Gox estate has assets worth more than $8 billion, the U.S. government has over $12 billion, and the German government still holds approximately $2.2 billion worth of Bitcoin.
Lin added, "The selling pressure from Mt. Gox users will determine the direction of bitcoin in the coming days."
She stated, "The market expects the majority of Mt. Gox users to dump their tokens, but if the selling is lower than expected, we might see a bounce back." On the other hand, we might soon be looking at the $50,000 level if there is sufficient selling to lower the price."
10x Research founder Markus Thielen lowered his price target from $55,000 to $50,000. In an email note, he said, "This situation may compel ETF holders and miners to liquidate more positions." He added that August and September have historically been "challenging months" for bitcoin. However, he added, "Bitcoin could see another rally attempt if the Federal Reserve cuts interest rates in September."
