Urging for investors to capitalize on the downturn gained momentum on the 3rd of July when Bitcoin [BTC] dipped below $60,000. Nevertheless, Bitcoin was not the sole digital asset to suffer a decline, as it dragged down nearly every other cryptocurrency along with it, including Ethereum [ETH].
Currently, BTC is trading at $57,598, marking a 4.88% drop in the past 24 hours. Despite this setback, a significant portion of the market views this correction as a chance to acquire assets at discounted rates.
According to the on-chain analytical platform Santiment, there has been a surge in mentions of “buy the dip,” indicating a growing interest in this strategy.
Will the market sentiment trigger a rebound?
However, not every call for action leads to an immediate turnaround. A bounce typically occurs when there is widespread skepticism about price increases across the crypto market.
Santiment, in its recent analysis, concurred with this view by stating,
“The current sentiment suggests that this is an opportunity to buy the dip. Ideally, we should wait for the initial enthusiasm to subside. The best time to invest is when investors are feeling impatient and doubtful.”
To assess whether the market sentiment is indeed skeptical or confident, we examined the crypto fear and greed index, which measures the emotional tendencies and attitudes of market participants towards Bitcoin and other cryptocurrencies.
With values ranging from 0 to 100, fear typically prevails during market corrections and price declines, while greed becomes apparent during rapid price surges when investors fear missing out on gains.
An extreme greed phase often precedes a market correction, while extreme fear indicates a potential buying opportunity. Presently, the Fear and Greed Index stands at 44, signaling a fearful market sentiment. This could be a favorable time for gradual accumulation, though further price declines cannot be ruled out.
If prices continue to fall, pushing the market into a state of extreme fear, it might present an ideal buy the dip opportunity.
Ongoing Challenges for Bitcoin
Meanwhile, blockchain analytics platform IntoTheBlock reported that Bitcoin breached a crucial support level at $60,000, highlighting the next major demand zone in the $40,000 to $50,000 range. It stated,
“Breaking below the $60,000 support has weakened a critical demand area for Bitcoin. This drop has left over 16% of BTC holders at a loss. Historical data indicates weak demand slightly below $60k, suggesting further downward pressure. The next significant demand region lies between $40,000 and $50,000.”
If Bitcoin’s price falls below $56,000 and continues to decline, it could enter the aforementioned range, resulting in losses for many holders. To prevent this, bulls must defend the $55,000 support level from being breached.
However, this task could be challenging as institutions are reportedly offloading Bitcoin.
For example, Lookonchain revealed that the German government has transferred a combined $249.50 million worth of Bitcoin to Coinbase, Kraken, and Bitstamp.
Such actions exert selling pressure on the coin, hindering price recovery. Consequently, market participants may have little choice but to continue buying the dip until prices stabilize.