Bitcoin sentiment in ‘wild’ divergence from reality as $53K BTC triggers ‘extreme fear’
Bitcoin (BTC) has stabilized at around $55,000 after dropping by $6,000 in a single day — but crypto market sentiment is still in shock.
According to the Crypto Fear & Greed Index as of Nov. 27, emotions are now at the most fearful since late September.
Crypto sentiment dives into “extreme fear”
Fear & Greed, which takes a basket of factors to compute a standardized sentiment score for crypto markets from 1-100, currently sits at 21.
Friday took its toll on the metric, with the score more than halving in 24 hours from its previous position of 47.
Those two readings correspond to sentiment going from “neutral” to “extreme fear” — missing out on the “fear” zone altogether.
Crypto Fear & Greed Index. Source: Alternative.me
While an expected reaction, the upheaval apparent the emotional state of market participants is becoming a source of amusement for some familiar names.
Investor and entrepreneur Alistair Milne noted that “extreme fear” is hardly an appropriate reaction to BTC/USD trading at $54,000. Indeed, the last time that the Bitcoin spot price was at those levels was in mid-October, Fear & Greed measured 78, otherwise known as an “extreme greed” territory.
“This much fear and we are at $54k. Wild,” he summarized.
On Sept. 30, when the Index last hit 21/100, BTC/USD traded at around $43,800 on Bitstamp.
BTC/USD 1-day candle chart (Bitstamp). Source: TradingView
Funding rates see overnight reset
As Cointelegraph reported, the latest and deepest phase of the BTC price correction came as trader habits on exchanges stayed curiously optimistic.
Funding rates, being positive despite Friday’s move, showed that market expectations were for a swift recovery.
Related: Bitcoin reverses ‘bear market’ at $53.5K as Pfizer gains on fresh panic over coronavirus ‘Nu’ variant
At the time of writing, however, it seems that the trip to lows of $53,500 was enough to reset the mood — funding rates are now back to normal and show no bullish bias.
Bitcoin funding rates chart. Source: Coinglass
As noted by analytics firm Delphi Digital this week, however, funding remains lower relative to the first half of 2021 — and this may signal a lack of overall direction.
“Funding rates continue to be low on the futures markets. This could be a sign that the shorter-term leveraged traders are still undecided directionally,” researchers told Twitter followers.
“Looking back at the start of the year, the bullish run-up has been accompanied by a significantly higher funding rate.”
‘I’m still very bullish’ on a pure-play bitcoin ETF in early 2022, Gemini executive says
A pure-play bitcoin exchange-traded fund may not be as far off as some think, according to one cryptocurrency executive.
With its approval of three bitcoin futures ETFs, the Securities and Exchange Commission signaled that it is embracing crypto as an investable asset class, Gemini’s David Abner told CNBC’s “ETF Edge” this week.
“The SEC is taking these progressive steps to move us forward,” said Abner, who is global head of business development at the crypto exchange.
“I thought we were going to be there by the end of this year,” he said, adding that he was surprised that the SEC rejected VanEck’s bid for a physical bitcoin-based ETF.
“I’m still very bullish,” Abner said. “I think they are just sort of waiting to take that next step. They’re potentially looking for some greater, clearer regulatory guidelines around the industry, so maybe we see that in Q1 and then we see an ETF right after it. I think there’s a little bit of movement in that direction.”
ETF Trends CEO Tom Lydon was less optimistic about the SEC’s timeline but flagged several catalysts that could benefit hopeful ETF providers.
“For the average advisor out there that is managing a diversified portfolio for their clients, not being able to buy bitcoin or a spot bitcoin ETF on a brokerage platform is somewhat of a handcuff,” he said in the same interview.
“If your clients go rogue and they go off and open up a Coinbase account, they potentially could shoot themselves in the foot as far as the volatility,” he said.
With many expecting the price of bitcoin to rise to $100,000 in 2022, “glowing demand” could give way to louder calls for ETFs that directly track the digital asset, Lydon said.
“I think this is something that the advisor community is pushing for. I think we’ll eventually see it. I wish it was going to be Q1 but I would say fingers crossed by the end of ‘22,” he said.
Disclaimer
Bitcoin too volatile to be adopted as legal tender, says BoE chief
Bank of England governor Andrew Bailey has expressed concerns over El Salvador’s adoption of Bitcoin (BTC) as legal tender after President Nayib Bukele announced the launch of Bitcoin City.
Bailey argued that El Salvador’s decision to adopt Bitcoin as a currency was alarming because consumers are likely to suffer from the cryptocurrency’s extreme volatility.
Trading around $43,000 on the first day of El Salvador’s Bitcoin adoption as legal tender, Bitcoin surged to a new historical high above $68,000 on Nov. 9. BTC’s price has significantly tumbled since then, with Bitcoin trading at $54,626 at the time of writing.
Bitcoin 90-day price chart. Source: CoinGecko
“It concerns me that a country would choose it as its national currency,” Bailey said at the Cambridge University student union appearance, Bloomberg reported on Thursday.
The governor also questioned whether Salvadorans understand the nature and the volatility of Bitcoin at all, which causes his biggest concern.
Bailey also cited a new statement on El Salvador by the International Monetary Fund (IMF), which is responsible for tracking risks to global financial systems. Issued on Monday, the statement outlines “significant risks” arising from Bitcoin as a legal tender and Bitcoin trading in El Salvador.
The IMF previously issued a warning against El Salvador’s Bitcoin Law in June, which didn’t prevent the country from adopting it and accepting BTC as legal tender in September. Bailey added that the BoE is studying whether to launch a central bank digital currency (CBDC), stating:
“There is a strong case for digital currencies, but in our view, it has to be stable, particularly if it’s being used for payments. That is not true for crypto assets.”
Related: El Salvador’s dollar debt dives on Bitcoin bond plans
The news comes shortly after BoE deputy governor for financial stability Sir Jon Cunliffe declared that CBDCs are a “revolution in the functionality of money driven by technology.” On the other hand, the majority of the British adult population was skeptical and concerned about a potential CBDC adoption in an August survey by Redfield & Wilton Strategies.