The broader market for digital assets suffered a sharp decline this past week, which likely rattled new investors. Even though the overall market and majority of investors remain significantly up on the year, weeks like these certainly test one’s resolve. Despite the fact that there is no single event solely responsible for this market behavior, the following are a few that continue to weigh on many minds.
Concerns about flooding the market
Due to the fact that Bitcoin has a fixed supply and is anti-inflationary, any event that results in a sudden surplus of BTC could cause its price to sway. A greater surplus will have a greater impact. Recent developments have resulted in undue FUD in the market due to a multitude of events.
The week has already seen reports of potential restitution taking place for victims by BitConnect, as well as the infamous Mt. Gox hack. Despite the fact that it is good to see such events become a thing of the past, the prospect of restitution appears to have struck fear into many people. It is because there is a fear of newly released BTC flooding the market, as victims may attempt to recoup previous losses by selling off any settlements.
It is possible that the present fear is unfounded, as it may take some time before the actual distribution takes place, and there is no reason to believe that all the recipients will be interested in offloading their BTC. Mt. Gox is currently the subject of a lot of FUD.
The Song that Never Ends
Craig Wright continues to affirm that he was Satoshi Nakamoto in what feels like a never-ending song. Wright is viewed as little more than a scam artist by the vast majority of those involved in digital assets due to his alleged history of lies and deceit. Although Wright could resolve this by simply proving/backing up his claims, he has so far not done so.
Regardless, many investors currently involved with digital assets are new to the sector, and have not been exposed to this ongoing saga for the past few years. As a result, many continue to panic, becoming fearful that a poor outcome of an ongoing lawsuit involving Wright will result in the release/sale of the vaunted Satoshi BTC stockpile.
The lawsuit, which is predicated on the idea that Wright maintains access to, and controls said wallets, could potentially result in a judgement for him to hand over up to 1 million BTC.
Reactions and metrics of the market
While the aforementioned events may have placed a role in the retreat this week, this activity could possibly be due to nothing more than a consolidation period after run-ups to all-time highs.
An oft-referenced metric which looks at overall market sentiment continues to be the Bitcoin Fear and Greed Index. This metric, which came in at 74 (greed) as recently as last week, has plummeted over the past few days to a value of 34 (fear).
In doing so, the index indicates that BTC has gone from an environment prime for selling to one now offering a relatively decent buying opportunity.