Data shows that the Fear and Greed Index for Bitcoin has declined after the price of this cryptocurrency dropped to $113,000.

Bitcoin Continues Recent Decline

Since setting an all-time high (ATH) above $124,000 a week ago, Bitcoin has faced a downward trend. This downward trend has only intensified in recent days, with BTC dropping below $113,000. Below is a chart showing the recent performance of this coin.

The price of this coin appears to have dropped significantly in recent days | Source: BTCUSDT on TradingView

From the chart, it can be seen that BTC has recovered slightly after forming a low around $112,400, but at the current price of $113,800, this asset is still significantly lower than a few days ago. As usual, the decline has dampened investor sentiment.

The Current Fear and Greed Index Shows a Fearful Market

"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 using data from five factors: trading volume, market capitalization impact, volatility, social media sentiment, and Google Trends. The index is then expressed as a score from 0 to 100.

When this index has a value greater than 53, it means that investors in general share a greedy sentiment. Conversely, an index below 47 implies the presence of fear in the market. The levels between these two thresholds correspond to a neutral sentiment.

Below is the current situation in this area according to the Fear and Greed Index:

As seen 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 greedy zone since June, but the latest decline of BTC means that investors have finally abandoned their optimistic sentiment.

Looking at history, changes in trading sentiment can actually be a positive signal for Bitcoin and other cryptocurrencies. The market often moves in the opposite direction of the majority's expectations, with excessive FUD sentiment helping to form a bottom and excessive exuberance leading to a peak.

This effect was observed in the market's lowest sentiment in June, as mentioned, coinciding with the time BTC reached a bottom below $99,000. The reversal of this asset only requires an index value of 42, but overall, strong fear sentiment is needed before a bottom can appear.

It is still unclear whether the latest decline in fear sentiment is enough to trigger a reversal for Bitcoin and other cryptocurrencies, or whether the sentiment will continue to worsen.

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