Data shows that the Fear and Greed Index for Bitcoin has declined after this cryptocurrency's price dropped to $113,000.
Bitcoin Continues Recent Decline
Since establishing a new all-time high (ATH) above $124,000 a week ago, Bitcoin has faced a downward trend. The downward momentum has only continued to increase over the past day, with BTC hitting a low below $113,000. Below is a chart showing the recent performance of this coin.
From the chart, it can be seen that BTC has recovered a bit after forming a low around $112,400, but at the current price of $113,800, this asset is still significantly lower than it was a few days ago. As usual, the price decline has worsened investor sentiment.
The Fear and Greed Index Currently Indicates a Fearful Market
"The Fear & Greed Index" is an indicator created by Alternative, informing us about the average sentiment present among traders in the Bitcoin and cryptocurrency market in general.
This index determines investor sentiment by using data from five factors: trading volume, market capitalization dominance, volatility, social media sentiment, and Google Trends. The index is then represented as a score ranging from 0 to 100.
When this index has a value greater than 53, it means that investors in general share a greedy sentiment. On the other hand, an index below 47 implies the presence of fear in the market. The level between these two thresholds corresponds to a neutral sentiment.
Here is the current situation in this sector according to the Fear and Greed Index:
As shown above, the index is at 44, indicating that Bitcoin investors are fearful. This is a change from the general market sentiment over the past few months.
The Fear and Greed Index had previously been in the greed zone since June, but the latest price drop of BTC means that investors have ultimately given up on optimistic sentiment.
Looking at history, this change in trading sentiment could actually be a positive signal for Bitcoin and other cryptocurrencies. The market often tends to move in the opposite direction to the expectations of the majority, with excessive FUD sentiment facilitating bottom formation and excessive euphoria leading to peaks.
This effect was observed during the lowest market sentiment in June, as mentioned, coinciding with the time when BTC hit a bottom below $99,000. The reversal of this asset only requires an index value of 42, but overall, stronger fear sentiment is needed before a bottom can appear.
It is still unclear whether the latest drop in fear is enough to cause a reversal for Bitcoin and other coins, or whether sentiment will continue to worsen.
