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Data shows the Bitcoin Fear & Greed Index has seen a bearish flip following the plunge in the cryptocurrency’s price to $113,000.
Bitcoin Has Continued Its Recent Drawdown
Since setting a new all-time high (ATH) above $124,000 one week ago, Bitcoin has been facing a downtrend. The bearish momentum has only furthered during the past day, with BTC hitting a low under $113,000.
Below is a chart that shows how the coin’s recent performance has looked.
From the graph, it’s visible that BTC has seen a bit of recovery after forming a low around $112,400, but at the current price of $113,800, the asset is still notably below the levels from the last few days.
As is usually the case, the bearish price action has worsened the sentiment among investors.
Fear & Greed Index Is Now Suggesting A Fearful Market
The “Fear & Greed Index” refers to an indicator created by Alternative that tells us about the average sentiment present among traders in the Bitcoin and wider cryptocurrency markets.
The index determines the investor mentality using the data of five factors: trading volume, market cap dominance, volatility, social media sentiment, and Google Trends. It then represents it as a score lying between zero and hundred.
When the metric has a value greater than 53, it means the investors as a whole share a sentiment of greed. On the other hand, it being under 47 implies the presence of fear in the market. A level lying between the two thresholds naturally corresponds to a net neutral mentality.
Now, here is how the sentiment in the sector currently looks according to the Fear & Greed Index:
As displayed above, the index is sitting at a value of 44, indicating that Bitcoin investors are fearful. This is a shift from how the mood has been like in the market for the past couple of months.
The Fear & Greed Index was previously in the greed zone since June, but the latest decline in BTC’s price has meant the investors have finally let go of bullish sentiment.
If history is anything to go by, this flip in trader mentality could actually turn out to be a positive sign for Bitcoin and other cryptocurrencies. The market often tends to move in the direction that goes contrary to the expectations of the majority, with an excess of FUD facilitating bottoms and overhype resulting in tops.
This effect was seen in action during the aforementioned June sentiment low, which coincided with BTC’s bottom under $99,000. The turnaround in the asset only required an index value of 42, but generally, a more powerful fear sentiment is needed before a bottom can occur.
It now remains to be seen whether the latest dip into fear is enough to induce a reversal in Bitcoin and other coins, or if sentiment will deteriorate further.
