It should be noted that the panic has been fuelled by the media. For example, Bloomberg on Friday wrote about a 20 percent drop in Bitcoin from the cryptocurrency’s peak and even claimed a new “bear market” had arrived.

Headline of Bloomberg article about a new bearish trend in the cryptocurrency market

However, shortly after publication, the headline was changed to a more neutral one. The new version of the article referred to a “cryptocurrency collapse amid news of a coronavirus.”

What happened to cryptocurrencies

The so-called Crypto Fear & Greed Index – that is, an index of fear and greed in the cryptocurrency world – from portal Alternative uses five metrics to determine market sentiment: volatility, trading volume, social media posts, cryptocurrency dominance indices and trends. On 27 November, the indicator dipped to 21 points, indicating a lot of fear among most market participants.

In other words, traders and investors are in no hurry to open new positions for fear of a further market collapse. In such circumstances, they tend to sell off their coin holdings to get into stackablecoin, i.e. cryptocurrencies with a peg to the value of the US dollar. While such tactics seem logical, many traders disapprove of them. They recommend selling cryptocurrencies as they rise and not doing so after a collapse, as by doing so they are giving up their own profits. Ideally, market downturns should be used to buy assets at a low price, while keeping in mind risk-limiting tools in case the situation deteriorates.

Fear and Greed Indicator

On Friday, the sharp drop in the index coincided with the collapse of Bitcoin – the indicator dropped from “neutral” to “fear” zone. For investor and businessman Alistair Milne, this dynamic seems illogical. He reminded us on Twitter that in mid-October, when Bitcoin was trading at roughly the same price, the Crypto Fear & Greed Index was around 78, or the “extreme greed” zone.

The “extreme fear” zone on the Fear & Greed chart

Meanwhile, on September 30, the last time the indicator showed its current value, Bitcoin was trading around $43,800.

Bitcoin price dynamics over the past few months

The collapse of the major cryptocurrency has also contributed to a decline in the volume of leveraged open positions – positions of traders in which they use leveraged funds from the exchange. As noted by Cointelegraph journalists, this trend is contributing to a return to market neutrality, where the asset has a chance for a new wave of growth formed by traders in spot trades.

Spot is the trading of cryptocurrencies at market prices. In this case, investors are not speculating on the possible price of coins, as is the case with futures. And this is a fundamentally different approach to investing.

Decline in Bitcoin margin trading activity

In these words, Bitcoin has received a jab of irony from the creators of the South Park series Trey Parker and Matt Stone. The latest episode of the show mentions the cryptocurrency as a common way to pay for goods and services after the end of the pandemic. True, BTC is still considered something “fraudulent” in one of the episode’s quotes.

This is the future – we’ve all decided that the centralised banking system is full of fraud and we trust short-term financial pyramid schemes more.

These are the words of a motel worker addressed by one of the main characters in the series, Stan Marsh. The screenshot below is a still from the series showing that the motel only accepts bitcoins in the form of plastic cards with a QR code.

A still from the South Park series

And here is the original of this scene on video.

By the way, the famous scene where Marsh tries to invest in a bank is also from South Park. It was in the 2009 episode “Margaritaville”, where the bank clerk solemnly announces that all of Marsh’s money is gone. In this way, the series creators made a reference to the 2008 global financial crisis. Now, almost 12 years later, South Park also mentions Bitcoin.

Note that Bitcoin is performing much better this morning than the day before. Specifically, overnight the cryptocurrency began to rise sharply in value and jumped from a local bottom of $53,256 to a high of $58,242.

Hourly chart of Bitcoin exchange rate


We believe investors' panic was well deserved as Bitcoin had been showing weakness for quite some time the day before. As such, the risks of a further correction were increasing - and that's what traders wanted to avoid. However, now it seems that the cryptocurrency still has strength: at least it is not going to fall below $50,000 yet. However, only time will tell.