Today the value of the Bitcoin Fear and Greed index has dropped to very low levels.
It is necessary, however, to specify that this index does not measure the market sentiment in real time, but actually indicates the state of the sentiment of the previous day.
So the value of today refers to yesterday, while today the crypto markets seem to have been a bit surprised.
Excess of fear today: Fear and Greed Index of Bitcoin at 17
Today the value of the index Fear and Greed of Bitcoin has dropped to 17.
Since this value ranges from zero (maximum fear) to one hundred (maximum enthusiasm, or greed), 17 is actually a much lower value compared to the neutral mark of 50.
It is also worth noting that it has been declining for seven days now.
On July 29, it was at 74, which means it was well into the enthusiasm zone.
Already on July 30, after the drop from $70,000 to $66,000, it had fallen to 67, but at that point everything was still completely normal.
The anomaly started with the data from August 3rd (37), after a day in which the price of Bitcoin had fallen below $62,000, a level reached only two weeks earlier.
At that point, it was already clear that an excess of fear was starting to spread in the markets, because 37 is a decidedly low level, while the price of Bitcoin above $61,000 was perfectly normal.
The sequence of the following days seems to confirm the excess of fear.
Bitcoin: the collapse of today’s Fear and Greed Index
On August 4th, the Fear and Greed index of Bitcoin remained at 34, but yesterday it dropped to 26, and today it has plummeted to 17.
In other words, in just one week it went from great enthusiasm to extreme fear, and this without anything truly shocking happening.
The excess of fear mentioned above could be the real cause of the drop in the price of Bitcoin below $50,000 yesterday, given that today it has already returned around $55,000.
Certainly in this collapse, broad and fast, the forced liquidations of leveraged long positions played a central role, with massive technical sales generated by the exchanges. The excess of fear contributed to the collapse by greatly reducing the buying pressure, and so as soon as the selling pressure jumped to suddenly high levels, due to the large amount of forced liquidations, the price could do nothing but sell a lot, and very quickly.
The return of normality
Once the forced liquidations are exhausted, the situation seems to have returned to normal.
Today, for example, the selling pressure does not seem high at all, while the buying pressure, although still very low, is no longer imploded as it happened yesterday.
With low but stable selling pressure, and equally low but slightly rising buying pressure, the price could only bounce back.
We will have to wait until tomorrow to understand if the sentiment has changed, because only tomorrow the Fear and Greed index will express the value referring to today.
It should be noted, however, that $55,000 is not at all a level in line with the normality of 2024, because the bottom of the long period of lateralization that lasted from the end of February until the end of June was $57,000.
New lateralization?
The collapse at the beginning of July, and the one from yesterday, might have significantly lowered the bottom of the lateralization phase.
Although it is still very early to assert that a new period of lateralization has begun since yesterday, the end of the collapse with today’s rebound at least allows us to start advancing such a hypothesis.
If that were the case, the bottom of a new hypothetical phase of lateralization could have shifted from the $57,000 of the first half of the year to the $50,000 touched yesterday.
The comparison with the past
To all this, it should be added that, if the trend of Bitcoin’s price in 2024 had followed that of previous cycles, it should have reached the halving at around 35.00$. Instead, it reached more than 60,000$.
In the past towards the end of the year in which the halving occurred, there has always been the start of a bullrun, particularly after the presidential elections in the USA.
Generally, the bullrun starts from a price very close to what Bitcoin had at the time of the halving, but this time it could be different.
On one hand, it seems unlikely that a new potential bullrun could start in the fall from a price well above $60,000, while on the other hand, it seems even more improbable that it could start from $35,000.
From the comparison with the past, however, it emerges that the bottom of this phase might not have been reached yesterday.
Not only in theory would there be room up to $35,000, but in fact yesterday for a brief moment they didn’t even hold $50,000. It is therefore possible to hypothesize that a potential new bull run in the fall could start from a price level below $50,000, but perhaps above $40,000.
Obviously, all this is not at all certain, and the bullrun might not even start at all. However, the current descending phase would seem to be a sort of preparation for a subsequent ascending phase, and if so, a possible autumn ascending phase could also bring with it the beginning of a new bullrun, as in past cycles.
