The Bitcoin Fear and Greed Index shows that sentiment around the asset has cooled somewhat recently, which could pave the way for a rebound.
The Bitcoin Fear and Greed Index has fallen somewhat recently
The “Fear and Greed Index” is an alternative indicator that tells us about the average sentiment present among investors in Bitcoin and the broader cryptocurrency market.
To determine trader sentiment, the index considers five factors: volatility, trading volume, social media sentiment, market cap dominance and Google Trends.
To represent this feeling, metric uses a numerical scale that runs from zero to one hundred. A score of 46 or below indicates the presence of fear among investors, while a score of 54 and above indicates greed in the market.
The region between these two (47 to 53) naturally corresponds to a neutral mindset. Apart from these three emotions, there are also two extreme emotions, “extreme greed” and “extreme fear”.
Extreme greed occurs at values above 75, while extreme fear occurs below 25. Historically, these two sentiments have been very relevant to BTC’s trajectory.
Tops tend to form when investors hold the former’s sentiment, while bottoms are more likely to occur when the market is in the latter’s territory.
According to the latest data from the Bitcoin Fear and Greed Index, traders are very greedy right now.
Looks like the value of the metric is 77 at the moment | Source: Alternative
As it seems, the indicator currently has a value of 77, which means that it is very fair, although it is within the extreme greed. As the chart below shows, this is quite a change from how it was recently.
The value of the indicator appears to have been going down recently | Source: Alternative
From the graph, it is visible that the Bitcoin Fear and Greed Index has been deep in extreme greed territory recently. On the 14th of this month, the indicator reached the figure of 88 and with this high, the BTC price recorded a current all-time high of around $73,800.
Since this peak, however, assets have fallen, and it seems that along with it, so has sentiment among traders. As mentioned earlier, a top is more likely when the market shares an extremely greedy mindset, and this probability is typically increased to the more extreme levels hit by the metric.
This may explain why it occurred when the recent top occurred. Another top this month, the one that occurred on the 5th, coincided with high values in the Fear and Greed Index (this time peaking in the 90s).
Shortly after this earlier peak and subsequent decline in the cryptocurrency, the asset bottomed out as the metric briefly exited extreme greed territory.
As the Bitcoin Fear and Greed Index looks to dip out of this zone once again, a bottom is likely to be near for the price this time around as well. It remains to be seen whether the sentiment will cool enough in the coming days to at least temporarily leave the hyperzone behind.
BTC price
Bitcoin fell towards $64,500 over the weekend, but the coin seems to have bounced back to $68,000 in the past day.
The price of the coin seems to have gone through some volatility recently | Source: BTCUSD on TradingView
Featured image from Yigit Ali Atasoy Chart on Unsplash.com, Alternative.me, TradingView.com
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