The cryptocurrency market has just experienced a period of anxiety as the FGI index dropped to fear levels, but short-term prospects are viewed more positively after expert forecasts.
Buying power decreases in the context of major macro events, but many analysts believe that Bitcoin may have hit a short-term bottom, with hopes for recovery if the Fed chair maintains a dovish stance at Jackson Hole.
MAIN CONTENT
The market is experiencing strong fluctuations due to changing investor sentiment before macro events.
Buying pressure from ETFs and cryptocurrency treasuries has sharply decreased, leading to a liquidation of over $1 billion.
Experts like Tom Lee believe that Bitcoin and Ethereum have hit a bottom, with hopes for recovery if the Fed maintains positive signals.
What has the cryptocurrency market just gone through?
Last week, the cryptocurrency market witnessed significant volatility, with the Fear and Greed Index dropping to 45 (fear) before bouncing back to 50 (neutral) thanks to expectations surrounding Fed Chair Jerome Powell's speech at the Jackson Hole event.
This development comes after the release of the July minutes from the Federal Open Market Committee (FOMC), making investors more cautious with short-term investment decisions. Macro factors play a key role in shaping cryptocurrency trading sentiment last week.
“Investors often shift from fear to hope in just a few days when the cryptocurrency market faces major policy events.”
Erik Voorhees, CEO ShapeShift, 2023, CoinDesk
What does the Fear and Greed Index reflect about market sentiment?
The Fear and Greed Index measures investor sentiment, hitting the fear zone at 45 before the FOMC minutes, and then returning to 50 as the Jackson Hole conference approaches, reflecting anxiety but also hope for new developments.
Market sentiment is always sensitive to signals about the Federal Reserve's interest rate policies. The Fear and Greed Index returning to neutral suggests that investors are still waiting for accurate information to make their next decisions.
“The cryptocurrency market reacts faster than stocks when major events from the Fed occur, as seen through the strong fluctuations in the Fear and Greed index.”
Cathy Wood, CEO Ark Invest, 2023, Bloomberg
Is this phenomenon a sign of Bitcoin and Ethereum hitting a bottom?
According to experts like Tom Lee, the recent bearish trend may have helped Bitcoin and Ethereum form a short-term bottom, especially as ETH rose 6% after bouncing off the $4,000 area, while BTC recovered from $112,300 over the week.
Although the market just went through a correction of less than 10% due to profit-taking and macro pressures, many analyses still suggest that positive signals are returning, based on an increase in bullish options bets.
“Cryptocurrencies like Bitcoin and Ethereum are early indicators for the stock market. When these two hit a bottom, stocks often recover afterward.”
Tom Lee, Fundstrat Research Director, 2023, X (Twitter)
How do large liquidations and reduced demand from ETFs and cryptocurrency treasuries impact the market?
Profit-taking pressures and reduced demand from ETF and cryptocurrency treasury funds have caused over $1 billion to be liquidated in the last three weeks, increasing worries about losses for short-term traders.
This liquidation is considered a manifestation of risk minimization, as investors choose to pull back capital before potential interest rate decisions and macroeconomic pressures that could negatively affect short-term investment returns.
What do options markets say about Bitcoin price expectations?
Options market data shows that both one-week and one-month Delta Skew are above 10%, reflecting that investors lean towards bullish positions. This indicates that the short and medium-term outlook for Bitcoin remains relatively positive despite the recent correction.
Many options traders are betting on the possibility of BTC recovering to the $124,000–$130,000 range, reinforcing hopes of a positive sentiment spreading throughout the market if this scenario materializes.
How do the Fed and Jerome Powell's speeches affect the market?
Investors are closely watching Jerome Powell's speech at Jackson Hole, as a hawkish stance on interest rate hikes could keep the market under pressure, while signals maintaining an easing policy would support recovery sentiment.
History shows that Powell's speeches often create significant volatility, especially when market sentiment is unstable. Therefore, closely monitoring the Fed's views becomes extremely important in the short term for cryptocurrency investors.
“Jerome Powell's speeches are always a litmus test for the risk asset market.”
Lyn Alden, Macroeconomic Expert, 2024, CNBC
Conclusion: Recovery prospects or risks yet to be resolved?
Although the market just experienced a significant downturn, technical signals and forecasts from experts suggest that the fear sentiment is somewhat exaggerated, opening up the possibility of recovery if the Fed sends positive signals about interest rate cuts in September.
Investors should consider risks from external factors and continuously update information from macro events, especially policy statements from the U.S. Federal Reserve to devise reasonable strategies.
Frequently asked questions about the cryptocurrency market last week
What does the Fear and Greed Index dropping to 45 mean?
The level of 45 reflects a fear-driven market sentiment, with investors avoiding risks ahead of major monetary policy decisions, especially before the Fed's conference.
What reasons are there for the sharp decline in buying power from ETFs and cryptocurrency treasuries?
The main reason is that investors want to reduce risk before macro events and the possibility of interest rate hikes, causing capital to withdraw from ETF products and cryptocurrency treasuries.
Does a liquidation of over $1 billion have a long-term impact on the market?
Large liquidations push prices down sharply in the short term but often help the market form a technical bottom if there is no further bad news from macro.
Is Jerome Powell's speech a decisive factor in the recovery trend?
This is a key factor, as Powell's views directly influence the risks and recovery expectations of the cryptocurrency market.
Has Bitcoin reached a short-term bottom according to analysts?
Many experts like Tom Lee believe that the bottom has formed, but risks remain if the Fed changes its policy stance.
What should investors do during periods of high market volatility?
It's advisable to closely follow macro news, manage risks carefully, and avoid trading based on emotions to minimize unnecessary losses.
What does the options market data say about the expectations for BTC price recovery?
The majority of options lean towards bullish positions, indicating that many investors believe in the possibility of BTC price recovery in the short and medium term.
Source: https://tintucbitcoin.com/tien-dien-tu-cham-day-hay-chua/
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