Bitcoin Sentiment Turns To Extreme Fear: Contrarian Signal Brewing?

Data exhibits the Bitcoin Fear & Greed Index has dropped into the acute worry territory following the newest crash within the cryptocurrency market.

Bitcoin Fear & Greed Index Now Pointing At ‘Extreme Fear’

The “Fear & Greed Index” refers to an indicator created by Alternative that tells us concerning the sentiment that’s current among the many common dealer within the Bitcoin and wider cryptocurrency markets.

The index makes use of the information of the next 5 elements to find out the investor mentality: buying and selling quantity, market cap dominance, social media sentiment, volatility, and Google Trends.

To symbolize the sentiment, it makes use of a numeric scale operating from zero to hundred. All values above 53 sign a web sentiment of greed, whereas these underneath 47 suggest worry available in the market. The indicator being between the 2 cutoffs naturally signifies a impartial mentality.

Besides these three foremost sentiment zones, there are additionally two particular areas known as the extreme fear and extreme greed. The former happens under 25 and latter above 75.

Historically, the acute sentiments have held a lot significance for Bitcoin and different cryptocurrencies, as they’re the place main tops and bottoms have tended to kind. The relationship between sentiment and worth has been an inverse one, nevertheless, which means excessive worry facilitates bottoms, whereas excessive greed leads to tops.

Followers of a buying and selling method known as “contrarian investing” exploit this truth to time their strikes. Warren Buffet’s well-known quote sums up the thought, “Be fearful when others are grasping, and grasping when others are fearful.”

After the newest crash in Bitcoin and altcoins, sentiment amongst traders has worsened into the acute worry zone, because the Fear & Greed Index exhibits.

As is seen above, the Fear & Greed Index is right down to 21 on Tuesday, a pointy change in comparison with Monday’s worth of 42, practically within the impartial zone. The present excessive worry sentiment is the strongest since April. Interestingly, that low in April coincided with a backside within the Bitcoin worth.

The reverse facet of the sample performed out in early October, when Bitcoin shaped its prime above $126,000 alongside a Fear & Greed Index worth of 74, proper on the boundary of maximum greed.

With the dealer sentiment now again inside the acute worry zone, it solely stays to be seen whether or not a backside will observe for the market. In the previous, the index has usually stayed contained in the area for an prolonged interval earlier than a turnaround, so it might be some time for BTC this time as effectively.

BTC Price

At the time of writing, Bitcoin is buying and selling round $100,400, down greater than 11% during the last week.