Crypto Markets Head for Worst Day in Two Months as Bitcoin Sentiment Shifts to ‘Extreme Fear’
- Bitcoin plunges to six-month low.
- Crypto markets fall below $200 billion for the first time since the spring.
- Bitcoin’s Fear & Greed Index prints “extreme fear.”
Crypto markets plunged anew on Friday and are on track for their worst performance in two months, as bitcoin’s fear and greed index flipped “extreme fear” following China’s stern warning targeting digital currency traders.
The selloff that hit bitcoin has quickly spread to alternative cryptos, with the total market cap hemorrhaging $28 billion over the past 14 hours.
Crypto Markets Crash
The total value of all digital currencies bottomed near $190 billion on Friday, the lowest since early May when markets were slowly crawling out of crypto winter. At the time of writing, asset values were worth a combined $195.5 billion, according to CoinMarketCap.
Bitcoin’s price flash-crashed below $7,000 for the first time in over six months. The number one cryptocurrency bottomed at $6,785 on Bitstamp before recovering around $7,140. With the drop, bitcoin has corrected almost 50% from its June high.
The selloff was accompanied by a substantial jump in trade volumes. Spot markets turned over more than $1.6 billion worth of bitcoin trades, according to Bitwise data.
None of the major cryptocurrencies were spared the losses Friday. Ethereum (ETH) plunged below $150 for the first time since April. XRP bottomed at $0.2256, a new 90-day low. Bitcoin cash (BCH), Litecoin (LTC) and EOS were off more than 6% each.
Fear Engulfs Bitcoin
Friday’s selloff was partly attributed to fake news about an alleged police raid of Binance’s ‘Shanghai operations.’ The Block, a New York-based blockchain media outlet, reported Thursday that the world’s largest cryptocurrency exchange was raided and shut down by authorities in the Chinese municipality. A scathing rebuttal from Binance CEO Changpeng Zhao later forced The Block to backtrack on its story.
But there was nothing fake about China’s broadening crackdown of digital currency trading. More than two years after banning the practice, Chinese authorities on Friday identified 39 exchanges that have failed to enforce the edict.
China’s clampdown pushed an already bearish market to the brink of fear, as investors began doubting bitcoin’s potential as a reliable financial asset. Bitcoin’s Fear & Greed Index a – a multifactor sentiment analysis – has plunged all the way to 20 on a scale of 1-100 where anything below 50 denotes fear.
The Fear and Greed Index was 51 (i.e., neutral) this time last month.
Prior to bitcoin’s latest dump, several traders on Crypto Twitter were forecasting a big reversal, possibly back down towards $6,500. Other traders, like the renowned Mark Dow, believe bitcoin is slowly dying due to an “echo bubble unwind,” a process that sees “progressively weaker FOMO” over time.