Key Takeaways:
The investor sentiment surrounding cryptocurrencies fell to the most negative level since the end of 2022 as Bitcoin (BTC) plunged below the $54,000 mark, pulling the broader crypto market down along with it.
The Crypto Fear & Greed Index is a popular contrarian indicator that measures the overall sentiment in the market for buying and selling cryptocurrencies. The widely-followed metric uses a variety of data sources to generate a score for the market’s enthusiasm toward BTC and other crypto assets between 0 and 100, with 0 representing “Extreme Fear” and 100 translating to “Extreme Greed”.
BTC Fear & Greed Score Drops To 29 As Selling Pressure Intensifies
On Friday, the gauge dropped to a score of 29, which has been recognized as the deepest drop into the “fear” zone since January 2023 when Bitcoin was trading at around $17,000 following the effects of the might bear market of 2022, which saw many crypto companies fail and declare bankruptcy.
In March, when Bitcoin hit an all-time high of about $73,500, the metric sent out a sell signal after hitting a score of around 90, which has been the 2024 top for the broader crypto market.
However, since then, BTC and Ether (ETH) are trading nearly 30% lower, while major altcoins have lost around 50% of their value, and cryptocurrencies with lower market caps declined even further.
Extreme fear may present a buying opportunity, but there are several factors to be considered before making that move.
US and German Governments and the Defunct Crypto Exchange Mt. Gox Are Catalysts of the Drop
Rachel Lin, CEO and co-founder of derivatives trading platform SynFutures identified the key catalysts behind the latest downturn as the liquidations of seized Bitcoins by the US and German governments, and the estate of the defunct Japanese crypto exchange Mt. Gox gearing up to refund former customers with 140,000 BTC this month.
As per data sourced by Arkham Intelligence, the German government reportedly holds around $2.2 billion worth of BTC, the US government has over $12 billion in BTC, and the Mt. Gox trustee has more than $8 billion in Bitcoin.
Lin noted that the selling pressure for Bitcoin is unlikely to abate in the short term. She said the direction in which Bitcoin trades in the coming days will be determined by the selling pressure created by Mt. Gox creditors, who are expected to liquidate their refunds at a premium over the value when they first purchased the asset over a decade ago.
She highlighted two possibilities for Bitcoin price; one where the selling expected from Mt. Gox customers is lower, resulting in a price rebound; and the other where there is enough selling that will push BTC price even lower.
Bitcoin Could Soon Fall To $50,000, But Fed’s Interest Rate Cuts In September Will Be A Positive Outcome
“We might be looking at the $50,000 level soon”, Lin said.
Meanwhile, Markus Thielen, founder of 10x Research, has trimmed his $55,000 price target for BTC to $50,000. In an emailed note to investors, he said the current market situation may “compel” ETF holders and miners to liquidate more positions.
While acknowledging that August and September are historically challenging months for Bitcoin, Thielen also gave a glimmer of hope, suggesting that if the US Federal Reserve cuts interest rates come September, then Bitcoin could make another attempt at a price rally targeting a new all-time high.
Bitcoin ETFs Record Highest Net Inflows In Two Weeks
Even though traders witnessed the world’s largest cryptocurrency by market capitalization plunge by 10%, Bitcoin spot exchange-traded funds (ETFs) saved the day.
According to Farside Investors, Bitcoin ETFs trading in the US recorded $143.1 million in net inflows on Friday. This was the highest level of inflows in at least two weeks.
It was the Fidelity Wise Origin Bitcoin Fund (FBTC) from asset management giant Fidelity that led the way by raking in $117.4 million in inflows, followed by the Bitwise Bitcoin ETF (BITB), the ARK 21Shares Bitcoin ETF (ARKB), and the VanEck Bitcoin Trust (HODL).
At the time of writing, Bitcoin (BTC) is trading at $55,312 – down 4.15% over the last 24 hours. Its market cap currently stands at $1.092 trillion.
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