Investor sentiment in the realm of Bitcoin has recently dipped to the lowest levels seen since February, a trend that could potentially set the stage for a bounce back in the cryptocurrency’s price. This shift in sentiment is informed by the ‘Fear & Greed Index’, an innovative tool developed by Alternative that offers crucial insights about investor sentiment within the cryptocurrency segment, not just about Bitcoin but other cryptocurrencies as well.
This comprehensive index uses a numbering system from zero to one hundred to represent investor sentiment, taking into account a range of factors including market volatility, changes in trading volume, sentiment analysis of social media posts, shifts in market cap dominance, and Google Trends data.
Scores above 53 on this index suggest a trend towards greed among investors, while a score below 47 signifies market fear. The area between these two numbers signifies a neutral market sentiment.
As of now, the Bitcoin Fear & Greed Index is currently at 71, indicating a primary sentiment of greed among investors. This is a slight drop from the previous day when the index was significantly higher, hinting at a slight shift in investor sentiment over the course of just 24 hours.
Beyond the standard sentiments of fear, greed, and neutrality, the index also codifies two “extreme” sentiments: extreme greed and extreme fear. Extreme greed is marked by an index score above 75, while extreme fear is represented by scores under 25.
Just yesterday, the Bitcoin Fear & Greed Index was at 79, boldly venturing into the territory of extreme greed. This has as such been a regular occurrence over the past month, rendering the recent dip to a regular level of greed an unexpected break in the trend.
One of the key reasons underlying the soaring investor sentiment has been Bitcoin’s recent rally that saw it charting fresh all-time highs. Interestingly, Bitcoin price trends have frequently tended to counter the majority’s expectations in the past. The stronger these expectations have been, the more the odds have been stacked in favor of such a contradictory move.
Historically, marked shifts in Bitcoin prices have most commonly been observed during phases of extreme sentiment, making them inflection points. For example, the recent all-time high was accomplished at an index level of 88.
In the wake of Bitcoin’s recent price dip, sentiment too has had a fall. However, the fact that it has moved out of extreme greed zone could possibly indicate a bottom forming. The last time this happened was on the 20th of March, when the price reached its nadir as the index stepped out of the extreme zone.
The current level of the Bitcoin Fear & Greed Index is not just lower than it was in March, but also the lowest since 11 February, when Bitcoin was trading around the $48,000 mark.
Bitcoin currently stands at the $65,800 level after registering a decline of over 7% in the past few days. This underlines how the Bitcoin price’s recent lows might potentially represent a turning point for this volatile yet compelling asset.
