Data from the crypto portfolio manager CoinStats showed that the Bitcoin Fear and Greed Index dipped by 50% from 34 to 17 within 24 hours. According to CoinStats data, Bitcoin’s dominance dropped by 1% as of August 6, while the price of Bitcoin settled above $55K.
CoinStats highlighted the factors that affected the Bitcoin Fear and Greed Index, which is updated every 12 hours as current market volatility (25%), market volume/momentum (25%), social media sentiments (15%), surveys (15%), Bitcoin dominance (10%), and Google trends (10%).
Bitcoin Fear and Greed Index reaches extreme fear level
Bitcoin Fear and Greed Index is 17 — Extreme Fear
Current price: $53,991 pic.twitter.com/c27hXPJByk— Bitcoin Fear and Greed Index (@BitcoinFear) August 6, 2024
The Bitcoin Fear and Greed Index dropped from 34 during the early hours of August 5 to 26 in the middle of the day to 17 as of August 6, according to data from CoinStats. The data showed that Bitcoin dominance dropped from 54.7% to 54% and further down to 53.7% within the same period. CoinStats’ data also showed that Bitcoin’s price was bullish, moving up 7.42% from a low of 49K to a current price of slightly over $55K.
According to CoinStats, the decline in Bitcoin dominance and increase in Bitcoin price (bull market) indicated the possibility of an altcoin season. The data revealed that investors were more likely to move to altcoins, leading to their increased popularity and growth. However, CoinStats explained that other altcoin-related factors, such as technological advancements and market liquidity, influenced the shift to altcoins.
Essentially, Bitcoin’s falling dominance reflected investor confidence in the crypto market, which indicated a healthy diversification into altcoins.
#Bitcoin dominance is forming RSI BEARISH DIVERGENCE ‼️
If Dominance falls we will see a upward movement in #altcoins pic.twitter.com/kkUNsgCVpM
— Gorilla Crypto 🦍 (@GorillaCrypto7) August 6, 2024
CoinStats’ data confirmed that the 24-hour market cap for Ethereum was $296B, $115B for Tether, and $70B for BNB. The data also revealed that the total market cap for all cryptocurrencies stood at $2T as of today, reflecting a 10.61% rise in the last 24 hours and a 52.16% gain from a year ago.
Historical data hints at Bitcoin recovery after low Bitcoin Fear and Greed Index
A study by Conghui Chen, Lanlan Liu, and Ningru Zhaoc revealed that fear sentiments had a positive effect on Bitcoin price and trading volume. The study showed that Bitcoin investors were more likely to trade frequently and make irrational decisions based on ‘fear sentiments.’
According to past Bitcoin price movements on CoinStats, periods of Bitcoin Fear and Greed Index at “Extreme Fear” preceded price recoveries, such as the mid-July sale of 50,000 BTC by the German government. Crypto investor Karan Singh observed that while people responded in panic by selling Bitcoin, big players like Fidelity and BlackRock went on a Bitcoin buying spree; thus, they supported Bitcoin price recovery.
People are panic selling #BTC 😱
But guess what? #BlackRock is buying #Bitcoin #Fidelity is buying #Bitcoin
Who's really winning here? 🚀 #Bitcoin #Crypto— Karan Singh (@karan_sing6140) August 5, 2024
Notably, another study by Ozkan Haykir and Ibrahim Yagli revealed that the fear of missing out (FOMO) pushed investors to invest in seemingly risky cryptocurrencies, causing prices to rise. For instance, a period of fear sentiments from August 2020 to October 2021 led to a 600% increase in Bitcoin’s price, while the S&P 500 increased by 30% within the same period.
