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The recent crash of the Bitcoin and crypto markets has sent prices into the red across the board. As a result, sentiment among crypto investors has dropped rapidly, pushing the Fear & Greed Index into Extreme Fear territory. This suggests that investors will be less likely to put money into the market, but it could also spell good news for the market.
Fear and greed index for extreme greed
The Bitcoin Fear & Greed Index is one of the best indicators for telling how investors feel about the market at any given time. This index uses a scale of 1-100 and represents sentiments ranging from fear, extreme fear, neutral, greed and extreme greed. Each of these can show how investors are feeling and could provide a clue to where the Bitcoin price could go from here.
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Typically, when the Fear & Greed Index is at either extreme, it can mean that the price is about to move in the opposite direction. For example, if the Bitcoin Fear & Greed Index is in Extreme Greed, this could indicate that the price is about to fall, and vice versa.
This trend would be positive for the Bitcoin price right now, just like the Fear & Greed Index fallen into the realm of Extreme Greed. By Friday, the Fear & Greed Index had fallen to a low of 22, putting it firmly in Extreme Fear territory.
If we assume that the Bitcoin price tends to recover when the index is in the red, this could mean that the price is hitting a bottom. An example of this is when the Bitcoin Fear & Greed Index fell to 20 in August, before the crypto market saw a rapid recovery. If that happens here, Bitcoin price could be on the verge of recovery.
Bitcoin rebound is not likely in September
Although the Fear & Greed Index could indicate a low in the Extreme Fear area, recovery may not take place for some time yet. This is because the month of September has historically been very bearish and this month is expected to be no different.
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Veteran analyst Benjamin Cowen outlined this in a post on X (formerly Twitter), showing that this month is already on track with previous Septembers. Year to date, the Bitcoin price has already fallen by 8.16%, and “If BTC ends the month at this price, it would be a fairly typical September,” the analyst explains.
The gem. return from #BTC in September it is -6.3%
So far this month, BTC’s return is already -8.16%.
The only time in the past five years that the September monthly return was worse than this was 2019 (-13.91%)
If BTC closes the month at this price, it would be a pretty typical September pic.twitter.com/bZ9cRIl9OU
— Benjamin Cowen (@intocryptoverse) September 6, 2024
However, the month of October is generally bullish, so if this trend continues, September will likely end in the red. But when October arrives, prices are expected to pick up again.
Featured image created with Dall.E, chart from Tradingview.com