News
Bitcoin Traders Sink Into ‘Fear’ As Price Crashes Below $58K
Data shows that Bitcoin trader sentiment has dropped to “fear” after the cryptocurrency’s price plunged over the past 24 hours.
Bitcoin Fear & Greed Index Now Suggests a Fearful Market
THE “Fear and Greed Index” is an indicator created by Alternative which provides us with information on the average sentiment currently expressed by traders in the Bitcoin market and in the cryptocurrency market in general.
The index uses a scale of zero to one hundred to represent sentiment. The score is calculated based on five factors: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends.
All values of the indicator above 53 indicate the presence of greed among investors, while those below 47 imply fear in the market. The region between these two limits naturally corresponds to a neutral mindset.
Here’s what the Bitcoin Fear & Greed Index currently looks like:
As you can see above, the Bitcoin Fear & Greed Index is reading 44, which suggests that sentiment is just inside fear territory. This is a change from how it has been in recent days.
The following chart shows how the indicator’s value has fluctuated over the past year.
The chart shows that the Bitcoin Fear & Greed Index had remained in neutral territory during the first three days of this month, but today, the fourth, sentiment has collapsed.
The reason for this worsening of mentality is the accident that the price of the cryptocurrency recorded in the past day, bringing its price below the $58,000 level.
It is also visible in the chart that the neutral sentiment in the first three days of July has shown a marked improvement from how June ended. The metric had touched a low of 30 on two occasions to end the month as the pinnacle of the bearish momentum BTC was facing.
As the bearish winds now seem to be picking up for the asset, the sentiment recovery may soon be lost. However, this may not be all bad news for the coin.
The price of Bitcoin has historically tended to move against the crowd’s expectations. The chances of such a contrary move occurring increase the greater this expectation becomes. That is, the more the Fear and Greed index points in one direction.
The major highs and lows have generally occurred when the asset is within the regions of extreme greed and fear, respectively. Extreme greed is the territory where the index reaches values above 75. Similarly, extreme fear occurs below 25.
If the indicator value continues to decline from here, it could be an extreme risk to watch, as this time it could also lead to a potential bottom for Bitcoin.
BTC Price
At the time of writing, Bitcoin is trading around $57,900, down nearly 6% in the last seven days.
Featured image by Dall-E, Alternative.me, chart by TradingView.com