Data shows bitcoin sentiment is close to entering the extreme greed zone. Here's what this could mean for the cryptocurrency's price
bitcoin's Fear and Greed Index has continued to decline recently
The “Fear and Greed Index” is an indicator developed by crypto/fear-and-greed-index/” target=”_blank”>Alternative This tells us about the average sentiment currently shared by traders in the bitcoin market and other cryptocurrencies in general.
The index uses five factors to determine this sentiment: volatility, trading volume, social media, market cap dominance and Google Trends. The metric uses a numerical scale ranging from zero to one hundred to represent sentiment.
All values of the indicator above the 53 mark suggest the presence of greed among investors, while those below 47 imply the predominance of fear. The area between these two thresholds correlates with neutral sentiment.
Now, here's what the bitcoin Fear and Greed Index looks like right now:
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As you can see above, bitcoin Fear & Greed currently has a value of 28, meaning that the average investor is showing fear. The degree of fear should also be quite noticeable, as this current value is quite within the territory.
In fact, the last level of the indicator is quite close to a special region called “extreme fear”. Investors show extreme fear when the index falls below 25. There is also a similar zone for the greed side, which is known as “extreme greed” and occurs above 75.
During the first half of last month, the metric had been in or near the latter region, but the recent market decline has dramatically degraded sentiment to the other end of the spectrum.
<img class="wp-image-628390 size-large" src="https://technicalterrence.com/wp-content/uploads/2024/07/1720462535_364_Bitcoin39s-39extreme-greed39-is-almost-here-will-the-price-bottom.png" alt="bitcoin Fear and Greed Index” srcset=”https://www.newsbtc.com/wp-content/uploads/2024/07/chart_4f3978.png?w=1130 1130w, https://www.newsbtc.com/wp-content/uploads/2024/07/chart_4f3978.png?w=460 460w, https://www.newsbtc.com/wp-content/uploads/2024/07/chart_4f3978.png?w=768 768w, https://technicalterrence.com/wp-content/uploads/2024/07/1720462535_364_Bitcoin39s-39extreme-greed39-is-almost-here-will-the-price-bottom.png 860w, https://www.newsbtc.com/wp-content/uploads/2024/07/chart_4f3978.png?w=750 750w” />
Historically, bitcoin and other cryptocurrencies have tended to show movements opposite to what most people expect. The stronger the crowd's expectation, the higher the likelihood of a contrary movement occurring.
Extreme sentiments occur when traders are too biased in one direction. Therefore, significant highs and lows for the asset have typically formed when the index has been in these zones.
Because of this fact, some traders prefer to buy when investors are showing extreme fear and sell when they are extremely greedy. This trading philosophy is popularly known as “contrarian investing.” Warren Buffet’s famous quote sums up the idea: “Be fearful when others are greedy, and be greedy when others are fearful.”
As bitcoin's Fear and Greed Index approaches extreme fear territory, the cryptocurrency may once again show profitable entry points soon, if the past is any guide.
btc Price
So far, bitcoin has not been able to recover much from its recent drop, as its price is still trading around $56,700.
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