Cryptocurrency collapse pushes the Fear and Greed Index to its lowest level since Bitcoin traded at $17,000 in early 2023.
The Fear and Greed Index in the world of digital currencies is a popular indicator that traders use to make buying and selling decisions against the prevailing trend, but there are warnings that there will be a further decline in the price of Bitcoin.
Pressure on Bitcoin
Sales of Bitcoin confiscated by the German and US governments, and selling pressure from recoverers of Mt. Gox is creating a huge increase in supply, according to SynFutures president Rachel Lin. Lin said Bitcoin could fall to $50,000 during historically weak months, but a rate cut by the Federal Reserve in September could spark a new rally, added Markus Thelen of 10x Research.
Low investment sentiment
Cryptocurrency investor sentiment has deteriorated to its lowest levels since the end of the 2022 crypto winter, with Bitcoin falling below $54,000 causing digital asset markets to decline. The Fear and Greed Index, created by Alternative.me, shows the market enthusiasm for Bitcoin and other major cryptocurrencies, where 0 represents extreme fear and 100 represents extreme greed.
Sharp decline
The index fell to 29 on Friday, its lowest level in fear territory since January 2023, when Bitcoin was trading at around $17,000 after the brutal bear market of 2022. The index sent a counter-sell signal last March when it reached the 90 level, which is What was roughly the 2024 top of the broader market and Bitcoin's high at around $73,500. Since then, Bitcoin and Ethereum have fallen by 25%-30%, while major altcoins have fallen by about 50% and smaller coins have lost even more.
Market analysis
Rachel Lane noted that the massive sale by the German and US governments coupled with a “preemptive sale” by reclaimers of Mt. Gox is the main factor behind the decline. She said the selling pressure will not fade in the short term, as the German government still owns about $2.2 billion in Bitcoin, the US government has more than $12 billion, and holdings of Mt. Gox exceeds $8 billion in assets.
Future expectations
Lin explained that the direction of Bitcoin in the coming days will be determined based on selling pressure from users of Mt. Gox. The market expects that most users of Mt. Gox are selling their tokens, but we may see a bounce if the selling volume is less than expected. “If there is enough selling to push the price down, we could be about to see the $50,000 level soon,” she added.
Marcus Thelen, founder of 10x Research, lowered his price target from $55,000 to $50,000. “This situation may prompt ETF holders and miners to liquidate more positions,” he explained, adding that August and September are historically “challenging” months for Bitcoin. However, he added: “If the Fed cuts interest rates in September, we may see a new rally attempt for Bitcoin.”
With these surrounding economic and political conditions, market monitoring remains vital to understand future trends and potential impacts on cryptocurrency prices.
