Data suggests that Bitcoin investors are still feeling fearful as the cryptocurrency’s price continues to consolidate.
Bitcoin’s Fear and Greed Index is currently indicating “Fear”
The Fear and Greed Index is an indicator created by substitute This briefly tells us about the general sentiment among traders in the Bitcoin market and the broader cryptocurrency markets.
To determine these sentiments, the index uses data on the following five factors: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends. The index represents this mindset as a score between zero and 100.
Investors share a sense of greed when the scale is above 53. On the other hand, a scale below 47 indicates that fear is dominating the market. The area between these two thresholds naturally corresponds to neutral sentiment.
Now, here’s what the current value of the Fear and Greed Index looks like:
As you can see above, Bitcoin’s Fear and Greed Index is currently at 34, indicating that investors are feeling fearful. The current fearful mindset is not very strong, given the distance to neutral territory.
Earlier in the month, the index showed particularly low values, as the chart below shows.
On August 6, the Fear and Greed Index hit a low of 17, its lowest level in more than two years. When the index reaches such low values, it reflects not only fear, but also a special emotion called extreme fear.
The extreme fear is defined as the area that appears at or before the age of 25. There is also a similar area to the greedy side, called extreme greed, which appears after the age of 75.
Interestingly, the fear-driven plunge coincided with Bitcoin hitting a low of $50,000. This is similar to what has been observed throughout the history of this asset.
Bitcoin tends to move against the expectations of the majority, and it is clear that areas of extreme sentiment are where this expectation is strongest, so it makes sense that price reversals are most likely to occur within them as well.
With sentiment settling into the normal fear zone and Bitcoin price consolidating, another venture into extreme fear may be needed if Bitcoin is to regain its bullish momentum. It remains to be seen how the indicator develops in the coming days.
Bitcoin price
Bitcoin has been unable to find a strong breakout above $61,000 recently, and it looks like the latest attempt may have ended in a similar failure as Bitcoin, which fell to $60,800.