Data shows the Bitcoin Fear & Greed Index has sunk to its lowest level since the 2022 bear market following the latest crash in the BTC price.
Bitcoin Fear & Greed Index Currently Has A Value Of Just 10
The “Fear & Greed Index” refers to an indicator created by Alternative that tells us about the average sentiment present among the traders in the Bitcoin and wider cryptocurrency markets.
The metric uses a numeric scale running from zero to hundred for representing the market mentality. There are five zones that this value can be in: extreme fear (25 and under), fear (26 to 46), neutral (47 to 53), greed (54 to 75), and extreme greed (76 and over).
Here is how the Fear & Greed Index appears right now:
Looks like the value of the metric is 10 at the moment | Source: Alternative
As is visible above, the Bitcoin Fear & Greed Index is sitting at 10 right now, which means the sentiment is deep into the extreme fear territory. Just a few days ago, the mood among the traders was significantly different, as the index was inside the neutral zone instead.
The reason behind this drastic change in the sentiment is the crash that the cryptocurrency’s price has gone through over the last few days.
The trend in the indicator over the past twelve months | Source: Alternative
Following the latest decline in the Fear & Greed Index, its value has hit the lowest point since mid-2022, when Bitcoin was deep into its last bear market. Thus, it would appear the bull run tumbling over in this manner has dealt quite the blow to investor morale.
If history is anything to refer to, though, this may not actually be such a bad development for the cryptocurrency. Indeed, BTC has often formed a bottom when the sentiment has dropped into extreme fear.
A similar effect has also been witnessed for the extreme greed side, where the coin has generally tended to attain a top. Last month’s peak also occurred when the index was inside this region.
Thus, it appears that Bitcoin has a tendency to move in the direction that’s opposite to what the majority of the crowd is expecting. Followers of a trading technique called contrarian investing exploit this fact to time their moves.
These traders buy when the average investor is feeling dread and sell when a wave of euphoria is pulsing through the market. Warren Buffet‘s famous quote also sums up this idea, “be fearful when others are greedy, and greedy when others are fearful.”
With the Bitcoin Fear & Greed Index falling to an extremely low level, perhaps contrarian traders would now be considering buying into the asset. It only remains to be seen, though, whether BTC would be able to form a bottom at these values, or if sentiment would have to degrade even further before it happens.
BTC Price
At the time of writing, Bitcoin is floating around $84,700, down almost 14% in the last seven days.
Looks like the price of the coin has seen a further drop in the past day | Source: BTCUSDT on TradingView
Featured image from Dall-E, Alternative.me, chart from TradingView.com
