The Crypto Fear and Greed Index, a key indicator of Bitcoin market sentiment, recently returned to neutral levels at a score of 52, which is its lowest since October of 2023, following the U.S. approval of Spot Bitcoin ETFs. This downturn in sentiment contrasts with its previous 'extreme greed' score of 76. Meanwhile, BlackRock's iShares Bitcoin Trust ETF seems to be targeting older investors with straightforward advertising, moving away from typical crypto marketing strategies. People now believe Wall Street may be better at marketing Bitcoin than Bitcoiners themselves.
A Fidelity report also noted a shift in the Bitcoin-gold relationship, with both showing similar trends despite rising interest rates, a contrast to their traditional non-correlated behavior. This correlation and the high proportion of long-term BTC holders could suggest a changing dynamic in investor behavior and market sentiment towards Bitcoin.
Crypto Fear and Greed Index Drops After Bitcoin ETF Approval
The Crypto Fear and Greed Index recently returned to "neutral" levels, which was last observed in October of 2023. This shift in sentiment happened just days after the landmark approval of Spot Bitcoin Exchange-Traded Funds (ETFs) in the United States.
The index, which serves as a gauge for Bitcoin's (BTC) market sentiment, now stands at a score of 52 out of 100. This is notably its lowest since Oct. 19 of 2023, when BTC was trading at an average daily price of around $31,000. This downturn in sentiment is particularly striking considering that less than a week ago, the index soared into the "extreme greed" territory with a score of 76.
The Crypto Fear and Greed Index utilizes a comprehensive approach to measure market sentiment, integrating data from six key performance indicators. These include volatility, which accounts for 25% of the score, market momentum and volume (also 25%), social media sentiment (15%), surveys (15%), Bitcoin's dominance (10%), and market trends (10%).
The approval of Spot Bitcoin ETFs by the SEC initially had a bullish impact on Bitcoin's price, propelling it to a high of $49,000 within 24 hours post-approval. However, this surge was very short-lived. By Jan. 12, Bitcoin's price dipped to as low as $41,500. This decline is attributed to traders taking profits, which is a pretty common response to rapid price increases in the cryptocurrency market. At press time, BTC was worth about $42,588.06 after its price took a 0.06% dip heading into the new week, according to CoinMarketCap.
The introduction of spot Bitcoin ETFs has also been met with a degree of uncertainty from the crypto community. Conflicting data regarding their performance and a lack of detailed information about these new investment vehicles have contributed to even more market hesitancy. This uncertainty is clearly reflected in the public's quest for answers, with Google Trends showing a 1,100% increase in searches for "Why is Bitcoin dropping?" as investors and enthusiasts alike seek to understand the recent price movements in BTC.
Bitcoin ETFs and “Boomers”
Although most of the crypto community seems a bit confused about what exactly to do with Bitcoin ETFs, BlackRock is going out of its way to make understanding ETFs and BTC as easy as possible for “boomers”.
BlackRock has decided to take a very unique approach with its advertising campaign for its newly launched iShares Bitcoin Trust ETF (IBIT). The campaign kicked off with an 1:56-minute video ad on Jan. 11, featuring Jay Jacobs, the U.S. head of thematics and alternative ETFs at BlackRock. Jacobs outlines the value proposition of Bitcoin and the ease of investing in it through BlackRock's ETF, emphasizing the convenience and expertise offered by the firm.
The ad stands out among others because of its stark contrast to typical crypto advertisements. It avoids flashy crypto jargon and flair, instead opting for a calm, and more straightforward presentation. This approach seems to specifically target wealthy, older investors, often referred to as "boomers." Bloomberg ETF analyst Eric Balchunas commented on the ad's effectiveness in appealing to this demographic, highlighting its calm disposition, clear investment case, and the professional appearance of the presenter. Chris Dark, founder of Fourth Turning Investments, praised the ad for its "boring" yet brilliant strategy.
Fred Krueger, a digital asset investor, also recognized the appeal of the ad to wealthy boomers. He noted that this particular demographic prefers traditional financial firms' involvement in Bitcoin over the younger generations. Krueger also mentioned the addition of IBIT and FBTC to portfolios by investors who trust firms like BlackRock and Fidelity, which could suggest a Wall Street takeover of the Bitcoin narrative. He even went as far as to say that “Wall Street will be a better marketer of Bitcoin than Bitcoiners”.
Fidelity Report Reveals a Shift in Bitcoin-Gold Dynamics
In related news, a recent report from Fidelity highlighted a very interesting shift in the correlation between Bitcoin and gold throughout 2023. Traditionally, Bitcoin and gold had a non-correlated relationship, but over the past year, this dynamic has changed, with both assets exhibiting similar trends.
The report specifically pointed towards a notable departure of BTC’s price behavior from its historical inverse relationship with interest rates. In the past, rising global rates, which typically decreases the appeal of risk assets, would have adversely affected BTC’s value. However, in 2023, despite the surge in global interest rates, BTC not only maintained its value but also experienced a rally. This pattern was mirrored in gold’s price movements.
Gold, in 2023, displayed fluctuations but still managed to perform robustly against multiple currencies. Its price in U.S. dollars saw a 14.6% increase over the year, driven largely by geopolitical risks and heightened demand from central banks. In comparison, BTC recorded a staggering 156% gain within the same time period.
Fidelity’s analysis suggests that the newfound correlation between BTC and gold might be a reflection of broader market sentiments. Factors like the United States' growing fiscal deficit and anticipations around changes in interest rates could be influencing investor behavior towards these commodities. Another theory is that the Bitcoin market could be forecasting further debt monetization by the Federal Reserve or future rate cuts. This speculation is based on Fidelity's research, which indicates that BTC’s price correlates more closely with the inflation of the money supply and various liquidity metrics than with consumer price inflation.
Another point of interest from Fidelity’s report is the observation of a tightening supply environment for Bitcoin. The proportion of long-term holders has reached a new all-time high of 70%. This statistic suggests that the bear market of the previous years resulted in a cohort of investors with a strong resolve to hold onto their BTC, even in the face of significant price rallies. As of mid-December, when BTC rallied by over 160%, there was no large movement of these long-held and illiquid coins to cash in profits.
