- Social media was agog with “buy the dip” calls, signaling market confidence in a rebound.
- While the Fear and Greed Index suggested an accumulation phase, on-chain data showed that BTC risks a further fall.
Calls for market participants to buy the dip increased on 3rd July after Bitcoin [BTC] slipped below $60,000. However, the coin was not the only one that dropped as it dragged almost every other cryptocurrency with it, including Ethereum [ETH].
At press time, BTC changed hands at $57,598. This represents a 4.88% decrease in the last 24 hours. Despite the fall, it seemed that a larger part of the market thinks the correction is an opportunity to buy at discount prices.
Santiment, the on-chain analytic platform, showed evidence of this. Using its social volume metric, AMBCrypto noticed that the “buy the dip” mentions have spread like wild fire.
Source: Santiment
Is the fear enough for a bounce?
However, it is not every time that calls like this yield result. Specifically, a bounce occurs when a large part of the crypto market doubt that prices will increase.
Santiment, in its post on X, also agreed with this thesis, saying that,
“The crowd is showing signs of seeing this as a buy the dip opportunity. Ideally, we wait for their enthusiasm to settle down. The time to buy is when they are impatient and skeptical.”
To have an idea if the broader market is skeptical or confident, we examined the crypto fear and greed index. The Fear and Greed Index for Bitcoin and other cryptocurrencies measures the emotional behavior and sentiment of participants.
The value ranges from 0 to 100. Typically, people tend to be fearful when the market is undergoing a correction and prices and hitting new red numbers. However, greed appears when prices are rising in incredible figures and people do not want to miss out on the opportunity.
However, if the index is in extreme greed stage, it means that Bitcoin and the broader market might be due for a correction. But in an extreme fear state, the market offers a “buy the dip” opportunity.
At press time, the Fear and Greed Index was 44, meaning the market was in fear. At this stage, it could be time to slowly accumulate. But that does not imply that price would not hit new lows.
Source: Alternative.me
If they do, then the market would move into extreme fear which could serve as the perfect buy the dip chance.
Bitcoin continues to face pressure
In the meantime, blockchain analytics platform IntoTheBlock revealed that Bitcoin had breached a critical demand zone at $60,000. As such, the next major demand level was between $40,000 and $50,000. It said,
“Bitcoin has breached its $60,000 support level, a critical demand zone. This move leaves over 16% of BTC holders in a loss position. Historically, demand just below $60k has been weak, suggesting further downward pressure. The next significant demand zone lies between $40,000 and $50,000.”
Should Bitcoin continue to fall as probably drop below $56,000, it might slip to the aforementioned region, and this could leave a ton holders in loss. To avoid such occurrence, bulls have to defend BTC from falling under $55,000.
But that could be difficult to achieve as institutions continue to sell BTC.
Read Bitcoin’s [BTC] Price Prediction 2024-25
For instance, Lookonchain disclosed that the German government has sent a combined $249.50 million worth of Bitcoin to Coinbase, Kraken, and Bitstamp.
When things like this occurs, the coin faces selling pressure and price might not be able to rebound. Therefore, market participants might have no option that to continue to buy the dip until prices stabilize.