- Bitcoin’s sentiment has dropped significantly following a $10,000 drop
- The Crypto Fear and Greed Index has dropped from 78 to 51 in just one week
- There is no need to be concerned about Bitcoin’s performance…yet
Sentiment within the crypto market has dropped significantly in the past week following Bitcoin’s two-week red streak, which has prompted concerns that the bull market has come and gone. Bitcoin slumped to $62,850 on Sunday night, down from $72,300 at the start of June, a near $10,000 drop that has seen the Crypto Fear and Greed Index drop from 78 to 51 in the past week alone. The price action has fueled fears that Bitcoin has put in a double top and is on the way to a reversal, although there are reasons to be hopeful that this has not happened.
$10,000 Drop Spooks Bitcoiners
Bitcoin has been in and around the $70,000 mark ever since accelerating there in March following the ETF hype, peaking at close to an all-time high of $74,000. A retracement to $57,000 was not unanticipated, after which many thought Bitcoin would continue past its new high and work its way higher. Things haven’t worked out that way, however, and the picture now looks a little more complex:
As we can see, Bitcoin hasn’t been able to break above that ceiling of $71,500 since late March, despite almost 10 assaults. The latest failed attempt in the first week of June has led to a steady stream of red candles, aided by whales cashing out at record levels.
This sustained selling pressure has added fuel to the theory that Bitcoin has put in a double top and is on the way towards a major correction, something that looks even starker on a weekly chart:
This price action has led to the Crypto Fear and Greed Index dropping to 51, down from 74 just a week ago:
It seems, therefore, that everyone is preparing for Bitcoin to drop like a stone having hit its all-time high.
Reasons to be Cheerful
There are reasons to remain optimistic, however. Firstly, for Bitcoin to enter a bear market here would be breaking with around 15 years of tradition. In previous bull runs, Bitcoin has never topped out after hitting the high from the previous cycle; it has always gone on to record much higher highs. There have been plenty of times in Bitcoin’s history when it has put in what looked to be a double top, including between April and August last year, only for it to turn out to be a bump in the road higher.
The next item of data we can turn to is the 21-week moving average. This indicator is great for determining if Bitcoin is in an uptrend or a downtrend, depending if Bitcoin is trading above or below it:
One glance at this indicator tells you all you need to know: while Bitcoin is trading above the blue line we can assume that the trend is still up, and we shouldn’t get concerned unless it starts to trade below it for a considerable length of time.
Even this isn’t a 100% accurate indicator, as Bitcoin was trading below the 21-week MA for the whole of last August and part of September before bouncing spectacularly. If price starts to break down underneath the 21-week MA then we should start to be concerned, otherwise this is a bump in the road until further notice.
