Data shows the Bitcoin trader sentiment has plunged into the extreme fear zone for the first time since September as BTC’s price has crashed.
Bitcoin Fear & Greed Index Is Now Signaling ‘Extreme Fear’
The “Fear & Greed Index” is an indicator created by Alternative that tells us about the average sentiment present among the investors in the Bitcoin and wider cryptocurrency markets.
The index uses the data of the following five factors to determine the sentiment: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends. It then uses a numeric scale running from zero to hundred to represent this market mentality.
When the indicator is above 53, it means the investors as a whole share a sentiment of greed. On the other hand, it being under 47 implies the dominance of fear in the market. The values lying between these two cutoffs correlate to a net neutral sentiment.
Besides these three main sentiments, there are also two ‘extreme‘ zones known as extreme fear and extreme greed. The thresholds for these regions are situated at 25 and 75, respectively.
Now, here is what the latest market sentiment is like according to the Fear & Greed Index:
Looks like the value of the metric is 25 at the moment | Source: Alternative
As is visible above, the indicator is sitting at 25 right now, which means the Bitcoin traders are extremely fearful. This is a massive flip from how the market mood was yesterday.
Below is a chart that shows the trend in the index over the past year.
The value of the index appears to have plunged during the past day | Source: Alternative
From the graph, it’s visible that the indicator had a value of 49 just yesterday, implying the investors held a neutral opinion on the cryptocurrency market. The drastic change in the sentiment today is a result of the sudden price crash that BTC has faced. This dip into extreme fear, though, may not be such a bad thing for Bitcoin and other digital assets, if history is anything to go by.
Markets display a tendency to move in the direction that’s the opposite of what the crowd is expecting, with the probability of a contrary move occurring rising the more sure the investors become of their opinion. The extreme zones happen to be where this likelihood is the strongest.
Bitcoin has generally formed major bottoms while the sentiment has been that of extreme fear and tops when extreme greed has been dominant. The price top last month, too, followed this pattern.
As such, with the Fear & Greed Index being back in the extreme fear zone now, it’s possible that a bottom could be close for BTC and others. It only remains to be seen, though, how long they stay in the zone will be for the market.
BTC Price
At the time of writing, Bitcoin is trading at around $89,000, down 7% in the last 24 hours.
The trend in the price of the coin over the last five days | Source: BTCUSDT on TradingView
