Following the Bitcoin crash to $42k within the first week of 2022, the fear and greed index has declined to extreme fear values not seen since July of 2021. What does the future hold?
Bitcoin Fear And Greed Index Points At “Extreme Fear”
As pointed out by an analyst in a CryptoQuant post, the BTC fear and greed index has dropped to very low values.
The “fear and greed index” is a crypto indicator that measures the general sentiment among investors in the market.
The index uses numbers to represent the sentiment on a numeric scale that goes from zero to hundred. Values of the indicator above fifty mean that the current holder sentiment is that of greed.
And values below 50 imply that the market is fearful at the moment. Index values below 25 and those above 75 fall into the “extreme” category, signifying extreme fear and extreme greed, respectively.
The indicator usually remains in the greed zone during bull runs. Extreme greed values have historically signaled that a correction in the price of Bitcoin may be near, and a top could form.
On the other hand, values of fear may be there during bearish trends, and extreme fear might imply that a bottom could soon form.
Related Reading | Bitcoin Whales Contribute 90% Of Money Inflow of Exchanges, How Can We Follow and Make Profits?
Now, here is a chart that shows the trend in the Bitcoin fear and greed index over the past year:
The crypto fear and greed index seems to have sunk to extreme fear values | Source: CryptoQuant
As you can see in the above graph, the indicator has now dipped to a value of 15. This is the lowest the metric has gone since July of the previous year.
Related Reading | Start Of Bear Period? Current Bitcoin Trend Looks Similar To June
Incidentally, the day in July when such low values occurred was also around when the Bitcoin price bottomed out. However, the quant in the post notes that this doesn’t necessarily mean that the current price has hit a bottom as well.
Following the May crash, the months of May and June also observed similar extreme fear sentiments multiple times.
So, it’s rather possible that the current low values of the indicator may persist for a while, just like back then, before the price finds its way back up.
BTC Price
At the time of writing, Bitcoin’s price floats around $42.4k, down 12% in the last seven days. Over the past month, the crypto has lost 16% in value.
The below chart shows the trend in the price of BTC over the last five days.
After the crash down to $42k a few days back, BTC's price further plunged down to $41k yesterday | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
