Data shows that the Bitcoin Fear & Greed Index recently fell to a neutral level. Here’s what this could mean for the cryptocurrency’s price.
Bitcoin Fear & Greed Index Now Points to ‘Neutral’
The “Fear & Greed Index” refers to an indicator created by Alternative that tells us about the average sentiment among traders in the Bitcoin and broader cryptocurrency markets.
This metric uses data from the following five factors to calculate its value: volatility, trading volume, social media sentiment, market capitalization dominance, and Google Trends.
When the indicator has a value greater than 53, it means that the investors as a whole share a feeling of greed. On the other hand, the fact that it is below 47 implies the dominance of fear in the market. All values in the range between these limits correspond to a net neutral mindset.
In addition to these three main sentiments, there are also two ‘extreme’ feelings: extreme fear and extreme greed. The former occurs at or above 75 and the latter at or below 25.
This is what the Bitcoin Fear & Greed Index currently looks like:
As shown above, the indicator has a value of 50, which implies that the overall sentiment in the market is exactly balanced. This is a big change from yesterday, when the index was at 69.
The chart below shows how the Fear & Greed Index has seen its value change over the past twelve months.
Just a few days ago, the indicator’s value was even higher, at 78, meaning the market was harboring a majority sentiment of extreme greed. The sharp decline in investor mentality since then is a result of the Bitcoin recovery rally fizzled out and culminated in a price crash.
This is the first time since the first half of October that the index has fallen into neutral territory. Between then and now, there was nothing but optimism in the market as the price of the asset was on an upward trajectory.
However, with this reset, it seems that the investors are now uncertain about the future of the cryptocurrency. If history is anything to go by, maybe this isn’t a bad thing.
Bitcoin and other digital assets generally tend to move in ways that run counter to the expectations of the masses; extreme greed is where big tops have occurred, including last year’s, and extreme fear is where bottoms have occurred.
While the market hasn’t gotten spooked yet, the fact that there is no longer excessive hype is still something that could help the price find a turnaround. It now remains to be seen how BTC and market sentiment will develop in the coming days.
BTC price
At the time of writing, Bitcoin is hovering around $94,200, down almost 4% in the past seven days.