Data shows that bitcoin market sentiment has returned to extreme fear as the asset price has retreated to the $59,000 mark.
bitcoin Fear and Greed Index Suggests Market Is Extremely Fearful Right Now
The “Fear and Greed Index” is an indicator created by Alternative that tells us about the average sentiment that is currently present in the bitcoin and cryptocurrency markets in general.
The index uses the following five factors to determine sentiment: volatility, trading volume, social media sentiment, market capitalization dominance, and Google Trends. It then represents this estimate using a scale ranging from 0 to 100.
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All indicator values above the 53 level imply that investors are showing greed, while those below the 47 level suggest the presence of fear in the market. The area between these two cut-off points naturally corresponds to a neutral mindset.
In addition to these three areas, there are also two special feelings called extreme fear and extreme greed. The first occurs at age 25 or younger, while the second occurs at age 75 or older.
Now, here's what the latest bitcoin Fear and Greed Index value looks like:
As you can see above, the indicator has a value of 25 right now, meaning the market is right inside the extreme fear zone. This is a pretty significant change from where the metric was yesterday.
The chart below shows the trend of the bitcoin Fear and Greed Index over the past month.
It is clear from the chart that the Fear and Greed Index had been at a high level near the end of July, but during the ensuing bearish momentum in btc price, the value of the metric had also seen a noticeable drop.
On the 29th, the index was at a value of 74, meaning it was right on the edge of extreme greed, but by the 6th of this month, it had entered the extreme fear zone with a value of 17.
The asset’s recent recovery led to an improvement in sentiment, with the index climbing back up to 48. However, it would seem that this growth could not last, as sentiment has once again fallen back into extreme fear as the price of btc has seen a pullback.
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However, the fact that sentiment has worsened may not be a bad sign for the cryptocurrency. Historically, bitcoin has tended to move against the expectations of the majority, and the extreme regions are where this expectation is perhaps strongest.
Therefore, whenever the market is within these zones, highs and lows have been formed. Now that the Fear & Greed Index is back within extreme fear, a low is likely to form. It now remains to be seen whether the asset's decline ends with this drop or if there is more to come.
btc Price
bitcoin appears to be showing signs of a rebound already, as its price has climbed back to $59,700 from its low of under $58,000 earlier in the day.
Featured image by Dall-E, Alternative.me, chart by TradingView.com
