- Bitcoin has dropped 12.6% in the past week, dragging most cryptocurrencies down and reducing the total crypto market cap by 23% to US$2.8 trillion.
- The Fear and Greed Index has plunged to 10, reaching “Extreme Fear” territory not seen since the Terra ecosystem collapse in mid-2022.
- Bitwise’s Chief Investment Officer Matt Hougan compares this pullback to July last year’s 24% drawdown which eventually led to a rally.
- Glassnode analysts note that new investors are realising significant losses, potentially signalling seller exhaustion though continued lack of demand could extend the downtrend.
Following months trading between US$108k (AU$171.3k) and US$92k (AU$145.9k), Bitcoin and the broader crypto market have seen a sharp price decline. At the time of writing BTC trades for US$84,626 (AU$134,269), a drop of 4% over the past day and 12.6% in the past week.
Related: Ethereum Leadership Spill: Executive Director to Step Down Amid Community Criticism
Very few cryptocurrencies have bucked the trend, with Ethereum down 5.5%, while XRP and Solana are also down by over 4% in the past 24 hours.
Index Drops to Lowest Since 2022 Terra Fiasco
Meanwhile, the Fear and Greed Index for the crypto market has moved into Extreme Fear territory, sitting at 10, a low not seen since mid-2022 when USDT and the Terra ecosystem imploded, sending the market into a frenzy.
The current price drop saw billions wiped off traders’ books and has sent the total crypto market cap to US$2.8 trillion (AU$4.44 trillion), which is a 23% decrease.
The crash follows a billion-dollar Bybit hack and an increasingly bleak macroeconomic outlook, as US President Donald Trump continues to threaten trade wars.
Matt Hougan, Bitwise’s Chief Investment Officer, compared the recent pullback to that of July last year when Bitcoin also saw a 24% drawdown. At the time markets were in panic but ultimately bottomed out and started a rally to US$100k.
Today’s market has a very similar setup, with short-term negatives weighing against long-term positives. For investors with a long enough time horizon, I think it offers a very similar opportunity.
Matt Hougan, Bitwise’s Chief Investment OfficerThe good thing – apart from this potentially being a great “dip buying opportunity” – is that the memecoin circus is over, wrote Hougan in a recent letter to investors.
Although it has obvious and serious consequences, as removing memecoin liquidity “from the system will have fallout, and you’re seeing it today”, Hougan added.
Analysts: Market in Downward Trajectory (For Now)
Overall, the analyst is hopeful for the sector’s future as fundamentals haven’t changed, despite memecoins and the Bybit hack:
On the other side, you have pro-crypto regulation, mass institutional adoption, a trillion-dollar stablecoin boom, the rebirth of DeFi, and the rise of tokenization.
Matt Hougan, Bitwise’s Chief Investment OfficerThough the CIO admits that it may take a while to get over the ebbing of the “memecoin boom”, as it was responsible for much of 2024’s liquidity – so buckle up and get ready for more volatility.
Related: SEC Ends Uniswap Probe, Clears Crypto Firm Alongside Robinhood and OpenSea
Glassnode analysts also wrote that new investors are now largely in the red and have come under “severe pressure and are beginning to realize significant losses”.
Without buyers’ demand, the trend could continue downward for a little longer, they believe.
Historically, this has signalled a period of seller exhaustion, however, a continued lack of demand could extend the current downtrend.
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