Recent data indicates that the Bitcoin Fear & Greed Index has returned to the fear zone after a decline in the cryptocurrency’s price.
Bitcoin Fear & Greed Index Points to Investor Anxiety
The “Fear & Greed Index” is an indicator developed by Alternative that reflects the average sentiment among traders in the Bitcoin and broader cryptocurrency markets.
This index evaluates five key factors to assess investor sentiment: volatility, trading volume, market cap dominance, social media sentiment, and Google Trends.
The resulting sentiment is represented as a score ranging from zero to one hundred. Scores above 53 indicate a general sentiment of greed, whereas scores below 47 signify fear in the market. Values between these two thresholds reflect a neutral outlook.
Currently, this is the sentiment among Bitcoin traders, as reported by the Fear & Greed Index:
The index currently stands at 45, indicating a slight sense of fear among investors. This fear metric marks a shift in the market sentiment, as it is the first instance since September 7th that the index has entered this territory.
The decline in sentiment is attributed to the recent bearish price movements experienced by Bitcoin and other digital assets, with a significant drop observed in the last 24 hours.
This shift towards fear, however, might not signal bad news for the market. Historically, Bitcoin and similar assets tend to move in a manner that contradicts mainstream expectations. The likelihood of such contrarian movements increases as traders grow more confident in a specific direction.
On the Fear & Greed Index, two zones signify heightened probability for such movements: extreme fear (below 25) and extreme greed (above 75). The extreme fear region often coincides with significant market bottoms, while extreme greed has previously triggered top formations.
While current investor sentiment does not indicate extreme fear, the absence of greed could still bode well for the prospects of a bullish trend. Time will tell how Bitcoin and other cryptocurrencies will perform in this environment.
In related news, the recent market downturn led to substantial liquidations in the derivatives market; however, speculators remain undeterred by the situation, as noted by CryptoQuant community analyst Maartunn in an X post.
As shown in the chart above, Open Interest dropped significantly alongside the plummet in Bitcoin’s price, but has since rebounded with an increase of $1 billion (2.63%).
BTC Price
Bitcoin has fallen to the $12,600 mark following its recent drop.
