Cryptocurrency Market Plunge Sends Fear & Greed Index to Lowest Point Since Bitcoin Hit $17K in Early 2023
Crypto market analysts are cautioning that despite the popularity of the Crypto Fear & Greed Index as a buy and sell indicator, there may still be downside risks for bitcoin’s price. Rachel Lin from SynFutures highlighted that the sale of seized BTC by the German and U.S. governments, coupled with the sell pressure from Mt. Gox user refunds, has created a significant overhang in the market.
Forecasts suggest that bitcoin could potentially drop to $50,000 in the upcoming historically weak months. However, Markus Thieled of 10x Research mentioned that a potential Federal Reserve interest rate cut in September could spark a new rally in the market.
Investor sentiment in the crypto space plummeted to levels not seen since the end of the 2022 crypto winter as bitcoin’s decline below $54,000 dragged down the entire digital asset market. The Crypto Fear & Greed Index, a widely-followed indicator, tracks market sentiment towards bitcoin and major cryptocurrencies, with extreme fear represented by a score of 0 and extreme greed by 100.
The index recently hit a low of 29, delving into the fear zone significantly, reminiscent of early January 2023 when bitcoin was trading around $17,000 after the previous year’s bear market.
The metric notably flashed a contrarian sell signal back in March when it reached 90, close to what turned out to be the 2024 peak of the broader crypto market and bitcoin’s all-time high of approximately $73,500. Since then, both BTC and ETH have experienced a 25%-30% decline, while major altcoins plummeted by around 50% and smaller tokens suffered even greater losses.
The recent market downturn was primarily driven by the selling of seized bitcoin by the German and U.S. governments, as well as the initiation of refunds by the Mt. Gox estate. Rachel Lin pointed out that the selling pressure is expected to persist in the short term, with substantial amounts of BTC still held by the German government, the U.S. government, and the Mt. Gox estate.
Looking ahead, the direction of bitcoin’s price hinges on the selling pressure from Mt. Gox users. Analysts anticipate a possible bounce back if selling is lower than expected, but a further price decline towards the $50,000 level is possible if selling intensifies. Markus Thielen of 10x Research has adjusted his price target to $50,000, citing the challenging nature of August and September for bitcoin. However, he also noted that a potential interest rate cut by the Federal Reserve in September could trigger another rally in bitcoin.
In conclusion, while the current market sentiment is bearish, potential catalysts like an interest rate cut could lead to a turnaround in bitcoin’s fortunes.
