Crypto market ‘in fear’ – Does that mean more pain or is the bottom in? 

Key Takeaways

The crypto market descended briefly to ‘fear’ levels mid-week pre-FOMC Minutes. Will greed be back after Powell’s speech at the Jackson Hole event? 

The latest crypto market pullback has got investors uneasy and on the borderline of fear ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on 22 August. 

In fact, on Wednesday, the Crypto Fear and Greed Index (FGI) slid lower to a ‘fear’ level of 45, before recovering to a neutral reading of 50 at press time.

This mid-week uncertainty coincided with the release of July’s FOMC Minutes. 

Source: CoinMarketCap 

However, some analysts believe that the worst might be over. In face, they have been downplaying the impact of Powell’s position on the market on Friday. 

Demand dips, but is the bottom in?

In Q3, Bitcoin climbed $120k and tagged $124k before triggering a <10% pullback amid heavy profit-taking and macro pressures. In fact, the demand from ETFs and crypto treasuries also declined significantly over the past few days, as illustrated by CryptoQuant.

This underscored trimming of risk ahead of this week’s key macro event- Powell’s outlook for a September rate cut. 

Source: CoinMarketCap

The sentiment has further been soured by massive liquidations on either side, exerting more pressure on traders.

Over the past three weeks, for instance, liquidations escalated to over $1 billion, indicating max pain for players.  

Source: Coinalyze

Still, the fear may be overblown, according to Wall Street analyst Tom Lee. The crypto market, especially Bitcoin [BTC] and Ethereum [ETH], may have ‘bottomed’ out, as per Lee’s assessment. 

“Crypto $BTC and $ETH are leading indicators to equities. Both bottomed yesterday evening = stocks bottom by Friday.”

Notably, ETH’s price bounced off $4k and pumped by 6% while BTC tagged the $112.3k-level on Wednesday. Besides, the Options market positioning also highlighted Lee’s projection.

At the time of writing, the 25 Delta Skew for 1-week and 1-month were still high above 10% – Hinting at a premium for calls (bullish bets) over puts (bearish bets). 

Simply put, the short and mid-term outlook appeared positive, despite the recent pullback from $124k to $112k. 

Source: Velo

In fact, Options traders upped their bets for a potential BTC rebound towards $124k-$130k, a move that could lift the rest of the market if validated. 

However, a strong hawkish stance by Powell could still dent sentiment and pull the markets lower. Hence, his position will be worth tracking.