Data shows that Bitcoin investors still hold a sense of fear as the cryptocurrency’s price continues to consolidate.
Bitcoin Fear and Greed Index is Currently Pointing to ‘Fear’
The “Fear and Greed Index” is an indicator created by Alternative This, in short, tells us about the general sentiment present among traders of Bitcoin and the broader cryptocurrency markets.
To determine this sentiment, the index uses data related to the following five factors: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends. The indicator represents this mindset as a score between zero and one hundred.
Investors share a sentiment of greed when the metric is above 53. On the other hand, being below 47 implies the dominance of fear in the market. The region between these two thresholds naturally corresponds to neutral sentiment.
Now, here is what the current Fear and Greed Index value looks like:
As can be seen above, the Bitcoin Fear & Greed Index is currently at 34, suggesting that investors are feeling fearful. The current fear mentality is not very strong given how far it is from neutral territory.
At the beginning of the month, the indicator showed particularly low values, as shown in the graph below.
On August 6, the Fear and Greed Index hit a low of 17, its lowest level in more than two years. When the indicator hits such lows, it no longer reflects just fear, but a special sentiment called extreme fear.
Fear of extremities is defined as the zone that occurs at age 25 or younger. There is also a similar region for the greed side, called extreme greedoccurring above 75.
Interestingly, the extreme low in fear coincided with Bitcoin bottoming below the $50,000 level. This is similar to what has been observed throughout the asset’s history.
BTC tends to move in the opposite direction to what most people expect, and extreme sentiment zones are clearly where this expectation is strongest, so it makes sense that price reversals are also most likely to occur within them.
With sentiment in normal fear territory and Bitcoin price consolidating, another foray into extreme fear may be necessary if Bitcoin is to kickstart a new bullish momentum. It remains to be seen how the indicator will develop in the coming days.
BTC Price
Bitcoin has failed to find a solid breakout above the $61,000 level recently, and it appears the latest attempt may have ended in a similar failure as BTC, which retraced to $60,800.