Bitcoin Sentiment Returns To Neutral As Price Tumbles Down
Data shows the Bitcoin market sentiment has declined to neutral today as the price of the asset has dropped below the $22,000 level.
Bitcoin Fear And Greed Index Now Points At “Neutral” Sentiment
The “fear and greed index” is an indicator that tells us about the general sentiment among investors in the Bitcoin market. The metric uses a numeric scale that runs from 0-100 for displaying the sentiment.
All values above the 50 mark suggest the market is greedy right now, while those below the threshold imply investors are fearful. While this break may be clean in theory, the boundary values between 46 and 54 are actually treated as a “neutral” sentiment in practice.
There are also two other special sentiments, called “extreme greed” and “extreme fear.” These take place at values of the index higher than 75 and lower than 25, respectively.
The significance of the extreme sentiments is that tops and bottoms in the price of Bitcoin have historically tended to take place in periods with such mentalities. Because of this reason, some traders believe it’s best to buy during extreme fear (where bottoms form), while extreme greed (where tops occur) provides the ideal selling windows.
Now, here is what the fear and greed index looks like for the current market:
The current sentiment in the BTC, as well as the wider crypto, market | Source: Alternative
As displayed above, the Bitcoin fear and greed index has a value of 48 at the moment, which suggests that the investors have a neutral sentiment with a slight lean toward fear.
This is a drop in value as compared to recent days when the market had been greedy. The below chart shows how the indicator’s value has changed over the past year.
Looks like the value of the metric has seen some decline in recent days | Source: Alternative
From the graph, it’s visible that the Bitcoin fear and greed index had been at fear and extreme fear values for most of the past year. Both these fear and extreme fear streaks were in fact the longest ever in the history of the indicator.
The run finally came to an end earlier this year, when the rally in the price of the cryptocurrency finally lifted investor sentiment out of the fear zone. Initially, the mentality was only neutral, but as the rally advanced further, holders finally started embracing the bullish trend and became greedy.
After spending some days in the greed zone, the metric has once again returned to a neutral value today as a result of the latest drawdown in BTC that has taken the price of the coin below $22,000.
Currently, it’s unclear if the sentiment drop is only temporary, or if it’s a sign that investors are once again hesitant about the rally’s sustainability, in which case the index might dip into the fear territory before long.
BTC Price
At the time of writing, Bitcoin is trading around $21,800, down 7% in the last week.
BTC seems to have seen some drawdown today | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Alternative.me
