The Crypto Fear & Greed Index, a widely-followed sentiment metric, has plummeted to its lowest level since Bitcoin traded at $17,000 in early 2023. This drastic shift in investor sentiment comes as Bitcoin’s price continues to slide, pulling down digital asset markets with it.
Bitcoin’s price has been on a downward trend, sparking fear among investors.
The Crypto Fear & Greed Index, created by Alternative.me, measures market enthusiasm towards Bitcoin and other large cryptocurrencies. The gauge dropped to 29 on Friday, its deepest dive into the fear zone since early January 2023. This extreme level of fear may present buying opportunities, but the reality is more nuanced with several factors to be considered.
“The direction of bitcoin in the coming days will be determined by the selling pressure from Mt. Gox users,” said Rachel Lin, CEO and co-founder of derivatives trading venue SynFutures.
The key catalysts behind the downturn were the unloading of seized bitcoin by German and U.S. governments, along with “preemptively selling” as the estate of defunct Japanese exchange Mt. Gox started to refund investors this month. The selling pressure is unlikely to abate in the short-term, with the German government still holding some $2.2 billion worth of BTC, the U.S. government holding over $12 billion, and the Mt. Gox estate holding more than $8 billion of assets.
Mt. Gox’s refund process has sparked selling pressure in the market.
Markus Thielen, founder of 10x Research, trimmed his $55,000 price target to $50,000. “This situation may compel ETF holders and miners to liquidate more positions,” he said, adding that August and September are historically “challenging months” for bitcoin. However, he noted that if the Federal Reserve cuts interest rates in September, bitcoin could see another rally attempt.
A Fed interest rate cut in September could spark a bitcoin rally.
As the market navigates this period of uncertainty, investors are left wondering if the bottom is in. While extreme levels of fear may present buying opportunities, the reality is more nuanced with several factors to be considered. One thing is certain, however: the coming days will be crucial in determining the direction of bitcoin’s price.
The direction of bitcoin’s price remains uncertain.
