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At yesterday’s session, the innovative index “Crypto Fear & Greed Index Over Time”, which determines the fear and greed of investors, reached the level of 20 points. This year, the indicator has already crossed this line three times, coinciding with the local bottom of Bitcoin.
The developers of “Crypto Fear …” consider their indicator the most accurate measure of the extreme values of the main cryptocurrency due to the presence in the calculations of the analysis of social network activity, Google Trends, combined with standard technical analysis.
Investor fear is confirmed by the flight of institutional capital from digital currencies. Cryptocurrency-focused closed-end mutual funds recorded the second-largest outflow of funds last week, according to a weekly report from CoinShares.
The largest investors were actively selling bitcoin shares. Moreover, they have transferred the maximum investment in history into a special investment product with short (short) positions, which allows you to earn on the fall of BTC.
Such a speculative mood indicates a pessimistic point of view of investors who are betting on a medium-term decline in the cryptocurrency market. These predictions are confirmed by the reaction of Bitcoin to the strengthening of the dollar and the increase in US bond yields.
Each new wave of growth in interest payments on 10-year US Treasury bonds attracts capital from the largest investors who prefer reliable, risk-free earnings. This not only reduces liquidity in Bitcoin, but also strengthens the dollar, putting downward pressure on all USD-denominated assets.
Interest rates on bonds are rising on inflationary expectations. Consumer prices are rising at a record pace in the US, forcing the Fed to raise rates, which, again, is driving US10Y yields to soar over the medium term.
In such a situation, a short position in Bitcoin can bring profit to investors or hedge investments in stocks. As a rule, the BTC rate falls more than stock indices.
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