Data shows that sentiment among Bitcoin investors has moved out of greed territory following the asset’s recent collapse below $61,000.
Bitcoin’s Fear and Greed Index is now inside the neutral zone
“Fear and Greed Index” is an indicator created by substitute This tells us the average sentiment shared by traders in the Bitcoin and broader cryptocurrency market at the moment.
This indicator takes into account data from five factors to determine sentiment: volatility, trading volume, social media sentiment, market capitalization dominance, and Google trends.
To represent sentiment, the indicator uses a scale ranging from zero to one hundred. All values below 47 indicate the presence of fear among investors, while values above 53 indicate greed in the market.
The area between these two areas naturally belongs to the neutral mentality. Bitcoin’s Fear and Greed Index appears to fall within this third zone.
The value of the metric seems to be 51 at the moment | Source: Alternative
As can be seen above, the Fear and Greed Index stands at 51 at the moment. This is a marked change from the 55 value seen yesterday, as the market was carrying greed sentiment at the time.
The worsening sentiment is due to the fact that cryptocurrency prices faced strong downward momentum in the past 24 hours. This drop in the gauge is in line with the trend of the past week, as the recent pullback in the asset is merely a continuation of the recent downtrend.
The chart below shows how the Bitcoin Fear and Greed Index has seen its value change over the past year.
Looks like the value of the metric has been sharply going down in recent days | Source: Alternative
As can be seen from the chart, the recent decline in the Bitcoin Fear and Greed Index has been very sharp. On June 18, at the beginning of this decline, the value of the gauge was 74, which is very deep in the greed zone.
This value was on the edge of the “normal” greed zone, as above 75, the index begins to reflect the presence of “extreme greed” among investors. Historically, this area has been very important for cryptocurrencies.
This is because the price of an asset tends to move against the expectations of the majority, and the greater the chances of such an adverse movement occurring, the stronger that expectation becomes.
In the zone of extreme greed, investors feel euphoria. Therefore, it becomes more likely that a top will occur in the asset. The all-time high (ATH) for the asset also occurred in March when the indicator was within this zone.
While extreme greed can lead to corrections in an asset, “extreme fear,” which occurs under the age of 25, can help the cryptocurrency hit the bottom instead. However, the indicator tends to stay within or near the greed zone during bull markets.
Thus, although sentiment has not completely intensified into extreme fear or even fear territory with the recent decline, the fact that it has calmed to neutral could still be an optimistic sign that the currency is reaching the end of its decline. Assuming that the uptrend remains the dominant force in the long term.
Bitcoin price
At the time of writing, Bitcoin is trading around $60,300, down more than 10% over the past week.
The price of the coin appears to have seen a steep drop in the past day | Source: BTCUSD on TradingView
Featured image from Dall-E, Alternative.me, chart from TradingView.com
