CoinDesk reports:
Social media is awash with calls to “buy the dip,” signaling renewed market confidence in a rebound. Despite fear and greed indices suggesting an accumulation phase, on-chain data indicates further downside risk for BTC.
Following Bitcoin (BTC) dropping below $60,000 on July 3, calls for market participants to buy the dip surged. However, it’s not the only coin experiencing declines, nearly dragging down all other cryptocurrencies including Ethereum.
As of press time, BTC traded at $57,598, marking a 4.88% decrease in the past 24 hours. Despite the drop, a significant portion of the market sees the pullback as a buying opportunity at a discounted price.
Evidence supporting this comes from on-chain analytics platform Santiment. AMBCrypto noted a wildfire spread of mentions about “buying the dip” based on its social volume indicator.
But can this fear be enough to spur a rebound? Not every call for such actions results in success. Specifically, rebounds occur when a significant portion of the cryptocurrency market doubts a price increase.
Santiment’s post on its feed also supports this argument, stating, “Signs suggest this is a buying opportunity. Ideally, we await their enthusiasm to stabilize. Buying happens when they’re impatient and doubtful.”
To gauge broader market sentiment—whether skeptical or confident—we examine the Fear and Greed Index for cryptocurrencies. This index measures participants’ emotional behavior from 0 to 100. Typically, fear sets in when markets pull back and prices show new red figures. Conversely, greed surfaces when prices surge dramatically, enticing fear of missing out.
Yet, if the index hits extreme greed, it signals potential pullbacks for Bitcoin and the broader market. Conversely, in extreme fear, the market offers a “buy the dip” opportunity.
As of press time, the Fear and Greed Index stands at 44, indicating a fearful market. At this stage, it might be time to accumulate slowly, though it doesn’t rule out the possibility of price setting new lows.
Should they do so, the market would plunge into extreme fear, potentially presenting a perfect buy-the-dip opportunity.
Bitcoin faces continued pressure. Simultaneously, blockchain analytics platform IntoTheBlock reveals Bitcoin broke crucial support at $60,000, placing the next major support level between $40,000 and $50,000. It stated, “Bitcoin has breached the $60,000 support level, a critical demand zone. This move has left over 16% of Bitcoin holders in the red. Historically, demand has been soft below slightly under $60,000, suggesting further downward pressure. The next significant demand area is between $40,000 and $50,000.”
If Bitcoin continues its decline, breaching $56,000 could slide it into the aforementioned range, potentially causing substantial losses for holders. Bulls must protect BTC from falling below $55,000, though achieving this amidst institutional BTC sales may prove challenging.
Read about Bitcoin’s [BTC] price predictions for 2024-25.
For instance, Lookonchain disclosed that the German government sent $249.5 million worth of Bitcoin to Coinbase, Kraken, and Bitstamp.
In such scenarios, coins face selling pressure, possibly impeding price rebounds. Hence, market participants may have no choice but to persist in buying the dip until prices stabilize.