Bitcoin Sentiment Turns To Extreme Fear: Contrarian Signal Brewing?

Data shows the Bitcoin Fear & Greed Index has dropped into the extreme fear territory following the latest crash in the cryptocurrency ￰0￱ Fear & Greed Index Now Pointing At ‘Extreme Fear’ The “ Fear & Greed Index ” refers to an indicator created by Alternative that tells us about the sentiment that’s present among the average trader in the Bitcoin and wider cryptocurrency ￰1￱ index uses the data of the following five factors to determine the investor mentality: trading volume, market cap dominance, social media sentiment, volatility, and Google ￰2￱ represent the sentiment, it utilizes a numeric scale running from zero to ￰3￱ values above 53 signal a net sentiment of greed, while those under 47 imply fear in the ￰4￱ indicator being between the two cutoffs naturally indicates a neutral ￰5￱ these three main sentiment zones, there are also two special regions called the extreme fear and extreme ￰6￱ former occurs below 25 and latter above 75.

Historically, the extreme sentiments have held much importance for Bitcoin and other cryptocurrencies, as they are where major tops and bottoms have tended to ￰7￱ relationship between sentiment and price has been an inverse one, however, meaning extreme fear facilitates bottoms, while extreme greed results in ￰8￱ of a trading technique called “contrarian investing” exploit this fact to time their ￰9￱ Buffet’s famous quote sums up the idea, “Be fearful when others are greedy, and greedy when others are fearful.” After the latest crash in Bitcoin and altcoins, sentiment among investors has worsened into the extreme fear zone, as the Fear & Greed Index ￰10￱ is visible above, the Fear & Greed Index is down to 21 on Tuesday, a sharp change compared to Monday’s value of 42, nearly in the neutral ￰11￱ current extreme fear sentiment is the strongest since April.

Interestingly, that low in April coincided with a bottom in the Bitcoin ￰12￱ reverse side of the pattern played out in early October, when Bitcoin formed its top above $126,000 alongside a Fear & Greed Index value of 74, right at the boundary of extreme ￰13￱ the trader sentiment now back inside the extreme fear zone, it only remains to be seen whether a bottom will follow for the ￰14￱ the past, the index has often stayed inside the region for an extended period before a turnaround, so it could be a while for BTC this time as ￰15￱ Price At the time of writing, Bitcoin is trading around $100,400, down more than 11% over the last week.