Recent data indicates that sentiment among Bitcoin traders has shifted to extreme fear as BTC has dropped at the beginning of the week.
Bitcoin Faces Another Challenge to Begin Monday
After a week of renewed optimism as Bitcoin’s price showed signs of recovery, it seems the cryptocurrency has chosen to start Monday by dashing those hopes.
Below is a chart illustrating the asset’s recent performance.
The price of the coin has been trending downward over the last few days | Source: BTCUSDT on TradingView
As shown in the chart, Bitcoin was trading around $86,000 just yesterday, but within the last day, the asset has faced a significant decline, bringing its price down to $82,300.
The overall digital asset market has also experienced declines during this period; however, Ethereum (ETH) has shown comparatively more resilience, with its price decreasing by only about 2%.
Given the market downturn, it’s to be expected that investor morale has also taken a hit.
Crypto Fear & Greed Index Plummets Back Into Extreme Fear Territory
The “Fear & Greed Index,” created by Alternative, serves as an indicator of the overall sentiment prevalent among traders in the Bitcoin and broader cryptocurrency markets.
This index assesses investor sentiment based on five factors: trading volume, market cap dominance, social media sentiment, volatility, and Google Trends. The sentiment is represented as a score from 0 to 100.
Scores below 47 suggest fear, while scores above 53 indicate that overall investor sentiment leans toward greed. The area between these two thresholds represents a neutral stance.
In addition to these three states, there are two ‘extreme’ zones: extreme greed (above 75) and extreme fear (below 26).
At present, the market finds itself in the latter zone, as reflected by the latest reading from the Fear & Greed Index.
The index currently stands at a value of 20 | Source: Alternative
As seen above, the Bitcoin Fear & Greed Index is currently at a value of 20. This marks a decrease from roughly 27 yesterday, placing market sentiment firmly in the fear zone.
The trend in the Fear & Greed Index over the past year | Source: Alternative
Though the index value of 20 shows an improvement from the month’s low of 15, it remains uncertain whether sentiment will decline further in the upcoming days.
Historically, extreme sentiment zones have held significant meaning for Bitcoin and other digital assets; prices tend to reach peaks or troughs when traders exhibit these sentiments.
This relationship is inverse, where investor pessimism typically leads to a market bottom and excessive enthusiasm results in a peak. Thus, the recent drop into extreme fear might suggest a potential low for Bitcoin and others could be approaching.
Featured image from Dall-E, Alternative.me, chart from TradingView.com
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