To be fair, China’s crypto crackdown played a part in the bottom falling out as well. And while the bleeding appears to have stopped, for now, bitcoin has shed approximately one-third of its value since May 12, the day when Musk’s warning that BTC mining’s carbon footprint is too high hit social media and triggered a wave of panic-selling.
Galaxy Digital’s Mike Novogratz today chalked the selling up to a “little volatility,” saying that the “decentralzed revolution is not going away.” He has seen this scene play out before. Crypto newcomers, however, were clearly spooked by the negative sentiment. The Bitcoin Fear and Greed Index currently hovers at 10, which illustrates that sentiment has shifted from a reading of “greed” earlier this month to “extreme fear” as investors fled for the exits. That pendulum could be set to shift once again, however.
Extreme Fear or FOMO?
Changpeng “CZ” Zhao, who is at the helm of cryptocurrency exchange Binance, believes that “markets tend to overswing in both directions.” He also suggested that extreme fear is about to be flipped to a fear-of-missing-out, or FOMO. CZ said that the panic sellers are “more likely to FOMO back in.” This wouldn’t be the first time.
The Binance chief pointed out that the pullback in the bitcoin market is not anything new, as evidenced by the flagship cryptocurrency’s more than a dozen corrections historically. He predicts that this won’t be the last market correction, either. The thing about bitcoin market corrections is that they tend to shake off the weak hands.
Meanwhile, analysts are grappling with how to assess a cryptocurrency market whose features are not inherent in the equity capital markets. Stocks can be volatile, but the roller coaster ride that bitcoin has taken investors on lately has even the most seasoned Wall Street analysts scratching their heads.
JPMorgan strategists cited by Bloomberg aren’t convinced that the selling in the bitcoin market is over, while Goldman Sachs warned that the severe volatility makes the biggest cryptocurrency less appealing to big investors.
Never one to shy away from the spotlight, Tron Founder Justin Sun has offered some clarity. According to him, “the bull market is certainly not over,” saying that instead, the cycle is in a “ period of adjustment.”
He is looking to mid and last summer for the bulls to wrestle back control of the bitcoin market.