Bitcoin Fear and Greed Index Drops to 16 as Long-Term Holders’ Resilience Gets Tested

Bitcoin charted a descending path on Monday, coming off a weekend that saw it give away roughly $1,000 of its hard-earned gains from last week. The leading crypto has extended losses on Tuesday, falling as low as $19,340 before clawing its way back to 19,390 where it was last spotted changing hands.

June CPI data: A potential market-moving event

This week is shaping to be an action-packed one judging by economic events on the calendar. The June 13 (Wednesday) readout has been highlighted as one of the important events to keep tabs on this week, bearing that the tone of the CPI data has historically impacted the crypto market.

White House press secretary Karine Jean-Pierre hinted at a press briefing on July 11 that the CPI data will feature higher figures for June than May. Jean-Pierre pointed to elevated gas prices last month, hence the uninspiring inflation outlook.

Other potential market-moving events that investors should consider watching keenly this week are US Weekly jobless claims & wholesale inflation data coming on July 14 and China GDP Annual Growth Rate Q2 report. The US Retail Sale data for June will also be coming on July 15, along with GDP numbers for China.

On-chain data, expert opinions and analyst remarks have been conflicting this week, adding weight to the forecast that the next few days will be testing for Bitcoin holders.

Bitcoin Fear & Greed Index drops 6 points to 16

Investors are once again showing aversion to Bitcoin, whose price slipped below $20,000 on Tuesday, raising more alarm of a severe decline in the coming days. The Bitcoin Fear & Greed Index, which appeared to have recovered over the weekend, was observed at an extreme fear score of 16 (out of 100) at the time of writing.

The current index is a significant difference from 24 on July 9, suggesting that many investors have in the last three days given up hope for upside swings in the short term. It is worth mentioning that Bitcoin has yet to solidify a revisit to the ‘Fear’ zone, which starts at 25, in more than two months. Last week’s gradual climb towards the ‘Fear’ region came at the back of less hawkish Fed remarks that seemed to allay fears of a recession for a while.

Glassnode: Hodlers are showing resilience as tourists flee the market

Crypto insights platform Glassnode, in a June 24 report, summed up Bitcoin’s plunging price action since the start of the year as one of history’s most severe and deep bear cycles. Citing several on-chain metrics, including Net Realized Profit/Loss, Mayer Multiple (a derivation of the 200-day simple MA) and MVRV Ratio, Glassnode analysts concluded that the current Bitcoin bear market is one of, if not the worst on record.

In the Weekly Newsletter reviewing Bitcoin’s run in Wk. 27, the analytics platform restated that Bitcoin is firmly in the bear territory with the network utilization activity contracting. The latter, Glassnode explained, is a result of the exodus of a significant proportion of tourists driven out of the market because of the asset’s poor performance. The newsletter also detailed that the decline in tourist interest is part of the markets’ push to purge speculative entities.

Holders are the last ones standing

The bear market, now in full swing, has disrupted the portfolio of many cryptocurrency investors. While both long-term holders and short-term holders have suffered, the latter group has endured a more trying period.

Glassnode observed in the July 4 newsletter that the exchange net position, a measure of the Bitcoin entering minus the volume exiting wallets in crypto exchanges, showed that investors are increasingly detaching from centralized wallets. More than 150,000 BTC was withdrawn from these wallets in June – outflows that have been attributed to several events notable among them recent action by centralized crypto entities to pause user withdrawals, breakdown of crypto ecosystems, and looming insolvency for some.

The report also revealed that shrimps and whales have been stacking up since mid-May. Shrimps have been particularly aggressive – adding 60.46k BTC per month, the most enthusiastic this group has ever been.

Bitcoin hodler base is becoming more solid

In a more recent analysis, Glassnode’s James Check set forth that the Bitcoin holders are increasingly getting used to volatile swings and thus showing more resilience. Check pointed out that the number of holders who have continued holding their assets despite extreme market conditions has been growing after every cycle. The analyst also touched on activity by shrimps and whales, adding that the former group of investors view the current state of the market as an immense period of value.

When bottom?

While most industry experts agree that Bitcoin is not yet out of the woods, there have been varying views on when the asset will bottom and how much pain holders need to endure before then. In the July 11  Onchain Newsletter covering Wk. 28, Glassnode argued that an extended period of pain could help carve out a bottom because of decreasing demand in the market.

“The present market structure has many hallmarks of the later stage of a bear market, where the long-term holders and the miners are under remarkable pressure to surrender. The volume of supply at a loss […] remains at a less severe level compared to previous bear cycles. This supports the observation that the market is well into the bear, however, it has not yet formed a confident bottom.”

The analysts penned that miners are still dumping due to increasing pressure to maintain liquidity and profitability. In the previous bear cycle, it was observed that miners continued selling their holdings for about four months. This trend suggests outflows could continue in the current quarter (Q3) as miners reel from poor Q2 returns and heavy losses “unless coin prices recover meaningfully.”

The newsletter further advanced that the 2018 bear cycle, which lasted over a dozen months, saw Bitcoin price fall by more than 80% across a 15-month period. Using this history to extrapolate a bottom, traders can expect Bitcoin to establish a resilient bottom below the current price  level – around 12k to 13k range.

To learn more visit our Investing in Bitcoin guide.