The Bitcoin price drop has been triggered by massive outflows from the Grayscale Bitcoin Trust (GBTC) as investors redeemed their shares.
Amid the current market turmoil, the Bitcoin Fear & Greed Index has continued to decline sharply. This drop has seen the index fall to its lowest level in more than three months as cryptocurrency investors become more fearful and keep their investments out of the market.
Bitcoin Price Regains Over $40,000
Bitcoin price has climbed back above $40,000 after the leading cryptocurrency fell to a low of $38,550 on Tuesday following increased selling pressure. With several altcoins on the rise, the total market capitalization of cryptocurrencies has recovered by more than $30 billion since the price crash and now stands at $1.55 trillion.
Bitcoin saw a relatively modest price rise following the much-anticipated approval of 11 spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) on January 10.
On Tuesday, Bitcoin was at a 7-week low of $38,550. This translated to a drop of $10,000 from the high of $49,000 reached on January 11 when BTC spot ETFs hit exchanges.
Experts attribute the drop in Bitcoin price to refunds of the Grayscale Bitcoin Trust (GBTC) by bankrupt companies such as FTX. According to a report from CoinDesk, since GBTC became an ETF earlier this month, investors have dumped $2 billion worth of shares.
Bitcoin Fear and Greed Index Plummets
In the months leading up to the end of the year 2023, the Bitcoin Fear & Greed Index rose steadily to reach high levels of greed. This index takes into account a number of factors to place investor sentiment into a number of categories ranging from extreme fear, fear, neutral, greed, and extreme greed.
The Fear & Greed Index represents investor sentiment using scores between 1 and 100, with the lower end of the score representing fear levels and the higher end representing greed. A score between 1 and 25 places investor sentiment at Extreme Fear, 26-46 is Fear, 47-52 is Neutral, 53-75 is Greed, and 76-100 is Extreme Greed. In 2023, the score rose to 74 as Bitcoin rose to $50,000.
However, as the market has retreated, so has investor sentiment, which is currently trending toward fear. Most recently, the Bitcoin Fear & Greed Index shows a score of 58, putting it in Neutral territory. It’s also two points lower than the previous day’s numbers of 50, meaning investor sentiment is trending more toward fear than greed.
The current figure is the lowest for the index since October 2023. The last time the Bitcoin Fear & Greed Index fell below 48 was on October 17, 2023. In cases like these, it shows that investors are less inclined to put money in the market. This causes demand to drop and asset prices across the space are affected as a result.
When Will It Stop Bleeding?
So far, the Bitcoin price drop has been triggered by massive outflows from the Grayscale Bitcoin Trust (GBTC) as investors redeemed their shares. More than $2 billion worth of BTC has left the fund, and this has put a lot of selling pressure on the asset.
However, as the week progresses, outflows are expected to slow as investors stop selling. In such a case, all demand would be to catch up with the supply pouring into the market, thus giving Bitcoin and other assets a chance to recover.
Bitcoin price is still trending around $40,000 after recovering from a drop to $38,500. The price rose 2.6% in the last week, according to data from Coinmarketcap.
By Audy Castaneda
