The cryptocurrency market experienced a dramatic shift this week, with the Crypto Fear & Greed Index plunging into the “Extreme Fear” zone for the first time in two years. This sentiment shift coincides with significant outflows from US spot Bitcoin (BTC) exchange-traded funds (ETFs).
Fear Grips The Market
The Fear & Greed Index, a widely used gauge of market sentiment, plummeted to a score of 17 on August 5th, marking the lowest level since July 2022. This dramatic drop, one of the biggest weekly declines in recent memory, reflects a wave of fear washing over investors.
Outflows from Major Bitcoin ETFs
Adding fuel to the fire, data from Farside Investors shows significant outflows from leading spot Bitcoin ETFs on August 5th. Grayscale Bitcoin Trust and ARK 21Shares Bitcoin ETF witnessed the biggest withdrawals, amounting to $69.1 million and $69 million respectively.
However, it’s important to note that not all Bitcoin ETFs were hit with outflows. The Grayscale Bitcoin Mini Trust, VanEck Bitcoin ETF, and Bitwise Bitcoin ETF all recorded inflows, albeit at a smaller scale. Interestingly, BlackRock’s iShares Bitcoin Trust saw no movement in either direction.
While Bitcoin ETFs faced outflows, spot Ether (ETH) ETFs enjoyed inflows of $48.8 million, with BlackRock’s iShares Ethereum Trust leading the pack at $47.1 million. Notably, VanEck and Fidelity’s Ether products also recorded inflows.
Market Crash Triggers Fear
The sentiment shift likely stemmed from the dramatic price crash on August 5th. Within a brief two-hour window, Bitcoin (BTC) and Ether plunged 10% and 18% respectively. This sharp decline resulted in over $600 million in leveraged long positions being liquidated, with altcoins experiencing even steeper losses.
This crypto market stumble coincided with a broader market correction. Weak employment data, slowing growth in major tech stocks, and renewed recession fears contributed to trillions of dollars being wiped from the US stock market.
Also Read: BlackRock Bets On Bitcoin – $683M Buy Contrasts $3.75B ETF Dump
Independent trader Bob Loukas described the last three days as a “one in seven to ten-year event,” with over $500 billion vanishing from the crypto market cap. Bitcoin analyst Tuur Demeester offered a cautious outlook, suggesting a potential bottom for Bitcoin somewhere between $40,000 and $45,000. However, he advises against placing bets on this prediction, highlighting the potential for rapid price increases in a Bitcoin bull market.
It’s worth noting that Bitcoin (BTC) has staged a partial recovery since the crash, climbing 11.85% to $55,680 since its low of $49,780 on August 5th (according to CoinGecko data). Only time will tell if this recovery is sustainable or if the market will experience further volatility.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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