Data shows Bitcoin market sentiment has declined to neutral today as the asset’s price has fallen below the $22,000 level.
The Bitcoin Fear and Greed Index Now Points at “Neutral” Sentiment.
The “fear and greed index” is an indicator that tells about the general sentiment among investors in the Bitcoin market. The metric uses a numerical scale from 0-100 to display sentiment.
All values above the 50 mark indicate that the market is currently greedy, while those below the threshold indicate that investors are fearful. While this break may be clean in theory, the borderline value between 46 and 54 is actually considered a “neutral” sentiment in practice.
There are also two other special sentiments, called “very greedy” and “very afraid”. This happens at index values higher than 75 and lower than 25.
The importance of extreme sentiment is that peaks and troughs in the price of Bitcoin historically tend to occur at times with this mentality. For this reason, some traders believe that it is best to buy when there is a lot of fear (where the bottom is), while being very greedy (where there is a peak) provides an ideal selling window.
For now, here’s what the fear and greed index looks like for today’s market:
The current sentiment in the BTC, as well as the wider crypto, market | Source: Alternative
As shown above, the Bitcoin fear and greed index has a value of 48 today, which indicates that investors have a neutral sentiment with a slight fear.
This is a drop in value compared to the last few days when the market has been greedy. The chart below shows how the value of the indicator has changed over the past year.
Looks like the value of the metric has seen some decline in recent days | Source: Alternative
From the chart, it can be seen that the fear and greed index of Bitcoin has been in extreme fear and fear for the past several years. Both fear and extreme fear are in fact the longest in the history of the indicator.
The run finally ended earlier this year, when the rally in cryptocurrency prices finally lifted investor sentiment out of the fear zone. At first, the mentality was just neutral, but as the rally progressed, holders finally started to embrace the bullish trend and became greedy.
After spending a few days in the greed zone, the metric once again returned to neutral values today as a result of the latest withdrawal in BTC that took the price of the coin below $22,000.
For now, it’s not clear whether the drop in sentiment is temporary, or a sign that investors are once again doubting the sustainability of the rally, so the index may be entering earlier fear territory.
BTC price
At the time of writing, Bitcoin is trading around $21,800, down 7% over the past week.
BTC seems to have seen some drawdown today | Source: BTCUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, Alternative.me