The Fear and Greed Index has dropped to the “fear” level, a milestone last seen at the beginning of 2023 when Bitcoin’s price hovered around $17,000. Many analysts are not optimistic about the current market situation.

Fear and Greed Index

The Crypto Fear & Greed Index is a widely-watched indicator in the crypto community. It reflects investor sentiment towards current prices, with two extremes: extreme fear and extreme greed, corresponding to a scale from 0 to 100.

Market Developments

In early July, facing the “ghost” of Mt. Gox officially repaying BTC and BCH, Bitcoin’s price plummeted nearly $10,000 in just 2 days.

This sharp decline and bleak outlook quickly soured community sentiment. Accordingly, the Fear and Greed Index fell to just 26/100, similar to early 2023 when BTC was around $17,000. At that time, the market was experiencing a prolonged winter, still feeling the aftermath of the FTX collapse in late 2022.

Current Situation

Just about 4 months ago, the Fear and Greed Index reached an all-time high of 90/100, at the same time BTC hit an all-time high of $72,000 in early March 2024. However, BTC and ETH prices have since dropped by 25%-30% from their peaks, with altcoins plummeting by 50%, and many smaller coins even halving or worse.

4h chart of the BTC/USDT pair on Binance at 01:00 PM on July 6, 2024

4h chart of the ETH/USDT pair on Binance at 01:00 PM on July 6, 2024

For some investors, the current panic is seen as an accumulation opportunity. As legendary investor Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.”

Expert Opinions

However, analysts are not as optimistic, pointing out that the situation is more complex and requires consideration of other factors. Rachel Lin, CEO and co-founder of the derivatives protocol SynFutures, believes the main reason for the decline is due to the U.S. and German governments selling confiscated BTC, along with the market “selling the news” ahead of the Mt. Gox repayment.

According to Lin, selling pressure is unlikely to ease in the short term. The German government still holds about $2.2 billion in BTC, while the U.S. has over $12 billion, as reported by Coin68.

Future Predictions

Lin shared: “The direction of Bitcoin in the coming days will be determined by the selling pressure from Mt. Gox users. The market expects most Mt. Gox users to sell the coins they receive immediately. However, if actual selling is lower, indicating that more people are holding BTC, we could see a recovery. Conversely, in the worst-case scenario, we might soon see the $50,000 mark.”

Markus Thielen, founder of 10x Research, also predicts that BTC is likely to drop to $50,000: “The current market situation could force ETF holders and miners to sell more Bitcoin. Furthermore, August and September have traditionally been challenging months for BTC.”

However, there could be a positive shift if: “If the Fed cuts interest rates in September, BTC could see another price rally.”

Source: Coin68