The Crypto Fear & Greed Index has plummeted to its lowest level since January 2023, when Bitcoin was trading around $17,000. This extreme fear sentiment is a stark contrast to the index’s reading in March, when it reached extreme greed levels near the local top of the crypto market.
The Crypto Fear & Greed Index has dropped to its lowest level since January 2023.
The index, created by Alternative.me, measures market enthusiasm towards Bitcoin and other large cryptocurrencies, with 0 being extreme fear and 100 being extreme greed. The gauge dropped to 29 on Friday, its deepest dive into the fear zone since early January 2023.
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, according to Rachel Lin, CEO and co-founder of derivatives trading venue SynFutures.
The selling pressure is unlikely to abate in the short-term, Lin said. The German government still holds some $2.2 billion worth of BTC, the U.S. government has over $12 billion, and the Mt. Gox estate has more than $8 billion of assets, data by blockchain tracing platform Arkham Intelligence shows.
“The direction of Bitcoin in the coming days will be determined by the selling pressure from Mt. Gox users,” Lin added. “The market expects most Mt. Gox users dump their tokens, but we might see a bounce back if the selling is lower than anticipated.”
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 added, “if the Federal Reserve cuts interest rates in September, Bitcoin could see another rally attempt.”
Bitcoin’s price has been on a downward trend since reaching an all-time high in March.
The Mt. Gox repayment plan is expected to lead to some heavy selling in Bitcoin, although this is likely to be short-lived and precede further price gains later this year and in early 2025, according to analysts.
John Glover, chief investment officer of crypto lending firm Ledn, told CNBC the windfall for Mt. Gox users would likely translate to huge sales in Bitcoin as investors look to lock in gains.
“Many will clearly cash out and enjoy the fact that having their assets stuck in the Mt. Gox bankruptcy was the best investment they ever made,” said Glover, who was previously a managing director at Barclays. “Some will clearly choose to take the money and run,” he said in emailed comments.
Mt. Gox users are expected to cash out their Bitcoin refunds, leading to selling pressure in the market.
The Crypto Fear & Greed Index’s extreme fear reading may present buying opportunities, but the reality is more nuanced with several factors to be considered. As the market navigates the selling pressure from Mt. Gox users and governments, investors will be watching closely to see if Bitcoin can bounce back from its recent slump.
Only five mining rigs were profitable for their operators as Bitcoin slumped to $54,000 this week, creating a scenario that could mark a “local bottom.”
At a rate of $0.08/kWh, ASICs less efficient than 23 W/T operate at a loss, according to mining giant F2Pool. A kWh, or kilowatt-hour, measures the energy usage of an electrical device or load. F2Pool’s graph shows four of Antminer’s various rigs and one Avalon rig that are profitable as long as prices are above $53,100. All other miners now cost more to run than the rewards received by operators.
The chart shows the profitability of various mining rigs at different Bitcoin prices.
The Crypto Fear & Greed Index’s extreme fear reading may be a sign that the market is due for a bounce, but with selling pressure from Mt. Gox users and governments, it’s unclear what the future holds for Bitcoin.
