The Bitcoin Fear and Greed index has moved to the 38 mark, entering the fear zone from neutral. The shift happened after the leading digital currency lost approximately 11% last week, pushing the whole cryptocurrency market into a sea of red.
Bitcoin index switches to fear
After fear comes extreme fear, which may indicate a buying opportunity since investors will be scared. Once Bitcoin enters the opposite zone, greed, it means that Bitcoin might be in for a price correction.
At the end of last week, the Bitcoin price fell from slightly under $30,000 on Thursday, landing in the $25,800 zone and losing 11.18%. On Friday, Bitcoin lost 8% within several minutes after the fake news of Elon Musk's SpaceX company selling $373 million worth of BTC.
However, crypto analyst Benjamin Cowen believes that such massive drops below the bull market support bank (BMSB) are typical of Bitcoin as it approaches closer to its scheduled halving event.
Upcoming Bitcoin halving in 2024
The next halving (or "halvening") is to take place in April-May 2024, and Bitcoin has plunged because of that, according to Cowen. The BTC price fall also coincided with the 5% price plunge of the S&P 500 index in August.
Halvening for cryptocurrencies based on the proof-of-work consensus algorithm takes place every four years and decreases by half miners' rewards. If now they make 6.25 BTC (roughly $188,876) per each newly minted block, after May 2024, they will start earning 3.125 BTC worth approximately $94,438.
This year, two other PoW coins went through halving — Dash (DASH) and Litecoin (LTC). Usually, halving makes a cryptocurrency more scarce, and so the price is expected to rise after that.
Did halving indeed push BTC to $69,000 in 2021?
In April and October 2021, Bitcoin reached two new all-time highs, the second of which was slightly around the $69,000 level. Many believe, however, that it was not the mining itself occurring in 2020 that pushed BTC to a new historic price peak.
Due to the pandemic that broke out in early 2020, the government of the U.S., as well as that of the U.K., Europe and Japan, began printing money for corporate bailouts and for supporting the population during the period of the quarantine. In the U.S. alone, more than $6 trillion USD were printed for bailouts and "survival checks" worth $1,200.
Printing has continued since then, and this year, after several major banks in the U.S., including the Silicon Valley Bank, collapsed, the U.S. government bailed it out after printing more U.S. dollars for that purpose.