Bitcoin’s fall precipitates ‘extremely fearful’ market sentiment

Bitcoin’s price plummet on 12 March below $5,000, was bad.

If you said that Bitcoin would lose over 50 percent of its value, a month after surging over $10,000, congratulations. However, chances are you didn’t; rather, chances are you expected the price to rise close to the halving, as did the rest of the market.

Needless to say, Bitcoin’s price plummet on 12 March, a fall that took the world’s largest cryptocurrency by market cap all the way down below $5,000, was bad. A few hours later, however, it got even worse as the immense selling pressure resulted in the price going as low as $4,000. In fact, some exchanges like Coinbase, Gemini, and Bitstamp saw isolated trades go as low as $3,800.

Altcoins were doing no better either. Ethereum, the largest altcoin by market cap was having a monumental start to the year, trading at over $300 back in February. However, the pendulum soon swung in the favour of bearish times as the world’s largest altcoin soon bled out and lost almost all of its 2020 gains.

The ETHUSD Perpetual Futures contracts on BitMEX sank to double-digits, as low as $85, before a recovery and some consolidation posited the coin at $127 a pop.

The rest of the altcoins were facing a bloodbath as well, with every single coin in the top-10 on CoinMarketCap losing over a third of their value overnight.

Looking at the source of this incredible collapse, many market analysts are still uncertain. With Covid-19 tensions bringing global markets down to their knees, the narrative of Bitcoin being hailed as an “uncorrelated asset” simply did not hold true. Since the beginning of the week, the S&P500 has lost 14 percent of its value and the FTSE100, the United Kingdom’s premier stock index, shaved just short of 20 percent in market capitalization, even as the Bank of England [BOE] announced emergency rate cuts.

The entire cryptocurrency market has been hit by a huge bearish wave, one that has wiped out all the gains from not only the Bitcoin market, but the altcoin market as well. When BTC touched the $3k level today, the confidence of the market was shaken and many of the market’s traders were taken in with fear. The fall put many investors into a loss, but the Net Unrealized Profit/Loss [NUPL] provided a clearer picture in determining the state of profit or loss for the Bitcoin network as a whole.

Glassnode defines NUPL as the difference represented between unrealized profit and unrealized loss to determine the network’s state of profit or loss. It explained that a value above zero indicated a state of net profit, thereby stating that the Bitcoin network, at press time, was still in a state of profit, despite the fact that the metric’s value was as low as ~0.22.

That being said, today’s market crash took the value down into the orange or “fear” zone.

Glassnode explained,

“Historically, when this happens, NUPL usually drops all the way into the red “Capitulation” zone (net loss) before recovering to profitable levels.”

Glassnode researchers had predicted more losses if the value did not recover. However, looking at the charts for 12 and 13 March, it is evident that the price of Bitcoin and most coins in the market had recorded massive losses.

Bitcoin, at 2300 UTC on 12 March, started to collapse from $5,798.25, falling by 31% within three hours. The losses seeped into 13 March, with the lowest point being recorded at $4,007.14.

In fact, on some exchanges, it even went down to the $3.8k level. Due to this, the Fear and Greed Index moved towards the red end of the meter. The metric, reading 10 on the meter, highlighted a sentiment of extreme fear in the crypto-market.

The indicator had been in the gradient of red and green from the end of February, regularly indicating a value od under 40. However, as the price fell, panic caught on and the market appeared extremely fearful, at press time.