Bitcoin Sentiment Nearing Extreme Fear: Significance
Bitcoin Sentiment Nearing Extreme Fear: Significance. Bitcoin Fear & Greed Index Has Plunged Inside The Fear Region Recently
The "Fear and Greed Index" is a metric that reflects the overall sentiment of investors in the Bitcoin and cryptocurrency market. This index uses a numerical scale ranging from zero to one hundred to represent the current sentiment. Bitcoin Sentiment Nearing Extreme Fear: Significance.
Values greater than 54 indicate that investors are driven by greed, while values below 46 suggest the presence of fear in the market. The region in between implies a neutral sentiment among investors.
Here's the current Bitcoin Fear and Greed Index:
As displayed above, the Bitcoin fear and greed index currently has a value of 30, meaning that most investors in the sector share a mentality of fear.
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Just yesterday, the indicator had a value of 40, implying that the sentiment has worsened quite a bit during the past day.
The cryptocurrency market has a sentiment indicator that measures the emotions of investors towards a particular asset. In addition to the three core sentiments, there are also two extreme regions, namely "extreme fear" and "extreme greed". These regions have been historically significant for cryptocurrencies.
Extreme fear occurs when the indicator is at or below 25, which has coincided with major bottoms in the asset's price. On the other hand, the tops have occurred in extreme greed when the indicator is at or above 75. Interestingly, Bitcoin tends to go against the expectations of most investors, and this tendency is strongest during extreme market sentiments.
Contrarian investing is a trading technique that exploits this pattern. As Warren Buffet famously said, "be fearful when others are greedy, and greedy when others are fearful." The current value of the sentiment indicator is at 30, which is quite close to the extreme fear region. If the sentiment worsens further in the coming days, it might drop into this territory, and contrarian investors might take it as a signal to buy the cryptocurrency.
It is worth noting that if Bitcoin bottoms out in the coming weeks and sets itself up for a reversal, it would align with the historical Halloween Effect. According to this effect, BTC and other assets usually perform the best between 31 October and 1 May. Those who practice the "sell in May and go away" strategy come back during this season to buy back into the asset. It remains to be seen how the Bitcoin sentiment will develop in the coming month and if the Halloween Effect will play any role.
At the time of writing, Bitcoin is trading at around $26,200, up 1% during the past week.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.