Bitcoin’s ‘extreme fear’ index suggests a prime opportunity for accumulation.
Market fear signals potential undervaluation of Bitcoin, ideal for long-term investors.
Extreme fear in the Bitcoin market could mean it’s time to start accumulating.
Bitcoin has shown resilience over the past week, despite the fear and greed index plunging to ‘extreme fear’ for the first time since January 2023. The Fear and Greed index measures market sentiment.
The Fear and Greed Index gauges market sentiment by analyzing factors like volatility, trading volume, and social media activity. This tool ranges from 0 (extreme fear) to 100 (extreme greed).
Low scores suggest widespread fear, potentially signaling buying opportunities, while high scores indicate excessive greed, often preceding market corrections. Investors use this index to make more informed decisions by understanding current market emotions.
According to the ‘Fear and Greed index, many investors are gravitating toward ‘Fear’. Historically, periods of extreme fear have often been followed by significant price rebounds. That said, some analysts believe that this is the best time to accumulate BTC.
Bitcoin Index Signals 'Extreme Fear' – Perfect Time to Begin Accumulation? https://t.co/UGgJJno0bb
— Investing.com UK (@uk_investing) July 12, 2024
Factors Fuelling Fear Among BTC Investors
The recent drop in the index is attributed to several factors. Firstly, the German government has been selling off large amounts of Bitcoin.
Since June, they have transferred and sold a significant portion of their holdings, causing market instability. This week alone, Bitcoin tested the $54,300 level but managed to rebound, showing strong buyer presence.
Another factor contributing to the market’s fear is the looming repayments from Mt. Gox. The defunct exchange announced it would start repaying creditors, distributing approximately $9 billion in Bitcoin and Bitcoin Cash over the next three months.
Despite these pressures, positive developments have helped prevent further declines in Bitcoin’s price. The U.S. inflation data showed a decline, leading to increased expectations that the Federal Reserve will cut interest rates in September.
A shift to looser monetary policy could boost risky assets like Bitcoin by lowering dollar yields and credit costs. Bitcoin surged at the beginning of the year when a rate cut was anticipated but then declined as inflation rose and the Fed adjusted its outlook.
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