Recent data indicates that the Bitcoin Fear & Greed Index has shifted to a bearish position following the drop in the cryptocurrency’s price to $113,000.
Bitcoin Continues Its Recent Decline
After reaching a new all-time high (ATH) above $124,000 just a week ago, Bitcoin has experienced a downturn. This bearish trend has intensified over the past day, with BTC dipping below $113,000.
Related Reading
The following chart illustrates the recent performance of the coin.
From the chart, it is clear that BTC has seen a slight recovery after reaching a low near $112,400, but at the current price of $113,800, the asset remains well below the levels seen in previous days.
As is often the case, the bearish price movement has negatively impacted investor sentiment.
Fear & Greed Index Signals A Fearful Market
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 assesses investor psychology based on five factors: trading volume, market cap dominance, volatility, social media sentiment, and Google Trends, presenting a score between zero and a hundred.
A score above 53 indicates a general sentiment of greed among investors, while a score below 47 signifies fear in the market. Values between these thresholds suggest a neutral sentiment.
Currently, here’s how sentiment in the sector appears according to the Fear & Greed Index:
As shown, the index is at a value of 44, suggesting that Bitcoin investors are experiencing fear. This marks a shift in sentiment from the previous months.
The Fear & Greed Index had been in the greed zone since June, but the recent decrease in BTC’s price has caused investors to abandon their bullish outlook.
If history is any guide, this change in trader sentiment may actually bode well for Bitcoin and other cryptocurrencies. The market tends to move against the prevailing expectations, with excessive fear leading to bottoms and excessive excitement generating tops.
This phenomenon was evident during the previously mentioned June sentiment low, which aligned with BTC’s bottom below $99,000. A turnaround in the asset was triggered by an index value of 42, but typically a stronger fear sentiment is required for a bottom to form.
Related Reading
It remains to be seen if this recent plunge into fear will be sufficient to instigate a reversal in Bitcoin and other cryptocurrencies, or if the sentiment will worsen.
Featured image from Dall-E, Alternative.me, chart from TradingView.com
