Bitcoin Market Fearful As Sentiment Dips To Lowest Since Jan
The data shows that Bitcoin investors have gotten scared again as market sentiment has dropped to its lowest since early January.
Bitcoin Fear and Greed Index Is Currently Pointing to “Fear”
The “fear and greed index” is an indicator that tells us about the general sentiment among investors in the Bitcoin (and broader cryptocurrency) market. The metric makes use of a numeric scale ranging from 0 to 100 to display this sentiment.
All index values above the 50 mark indicate that investors are currently greedy, while those below this threshold suggest that the market is fearful at the moment.
While the cutoff could be clean in theory, in practice values close to 50 (between 46 and 54) are considered a kind of “neutral” sentiment.
There are also two other special feelings called extreme fear and extreme greed. The first of these occurs at values below 25, while the second occurs at levels above 75.
The significance of the extreme fear region is that bottoms in the price of Bitcoin have historically taken shape when investors have maintained this sentiment. Likewise, tops formed as extreme greed took hold of the market.
Now, here’s a gauge that shows how sentiment is in Bitcoin and the wider cryptocurrency sector right now:
The market sentiment seems to be that of fear right now | Source: Alternative
As you can see above, the Bitcoin fear and greed index currently has a value of 34, which means that investors share a feeling of fear right now. This change in mindset is recent, however, as the latest drop in the cryptocurrency’s price is what has investors getting scared.
The chart below shows how the index value has changed over the past year:
Looks like the metric's value has plunged in recent days | Source: Alternative
From the chart, it is visible that the metric had quite low values during the Bitcoin bear market, but with the start of the rally in January, the sentiment improved dramatically and reached the greed values.
Market sentiment has hovered between greed and neutral during the months since then, but over the past two days the indicator has plummeted. Current index values are the lowest since early January, when market sentiment started to improve. This means that the price drop effectively reset whatever developments investors made in terms of mindset during the last rally.
A positive takeaway from the sentiment decline, however, could be that Bitcoin may now be more profitable to buy, as the odds of a bottom generally increase the further the index falls.
A trading philosophy called contrarian investing is actually based on this idea, where investors prefer to buy when the market is at its worst and sell when investors are greedy. Perhaps it was times like now that a contrary investor would move to buy more cryptocurrencies.
BTC price
At the time of writing, Bitcoin is trading around $19,700, down 12% over the past week.
BTC has plunged during the past day | Source: BTCUSD on TradingView
Thought Catalog featured image on Unsplash.com, charts from TradingView.com, Alternative.me