Bit­coin’s fall pre­cip­i­tates ‘ex­tremely fear­ful’ mar­ket sen­ti­ment

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

AMBCrypto Weekly - - Front Page -

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.

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