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The data shows that the cryptocurrency market has been filled with fear for most of 2022, and so far the streak continues into the new year.
Crypto Fear and Greed Index Continues to Point to ‘Fear’
The “Fear and Greed Index” is an indicator of general investor sentiment in the cryptocurrency market. This metric uses a numeric scale from 0 to 100 to display sentiment. If the indicator shows values above 50, it means that the market is currently greedy. On the other hand, values below the threshold indicate what investors are currently afraid of.
The index also has two special areas called “Extreme Fear” and “Extreme Greed”. The former occurs when the metric assumes values below his 25, the latter he is observed above 75.
The importance of extreme fear is that cryptocurrencies like Bitcoin have historically seen bottom formations when the indicator is in this zone. We believe that offers the best buying window for digital assets. Likewise, tops form during periods of extreme greed, so times of such sentiment are the best times to sell.
A trading strategy called “contrarian investing” is based on this idea. Warren Buffett’s famous quote is best summed up in the words, “Be fearful when others are greedy, and be greedy when others are fearful.”
Related reading: Peter Schiff says prepare for worsening inflation. What does this mean for Bitcoin?
Here is a chart showing trends in the Fear and Greed Index of cryptocurrencies over the past year.
The value of the metric seems to have gone completely stagnant in recent months | Source: Alternative
As shown in the chart above, crypto market sentiment remained in fear territory for the entirety of 2022, with some very short spikes into greed territory. For most of this period, investors were not just scared, they were very scared. This shows the psychological toll a prolonged bear market has taken on holders.
During this past year of rock-bottom mentality, the Index observed the longest streaks ever in both Fear and Extreme Fear. And it looks like the former’s streak isn’t over just yet, as the year began when the metric remained just above the extreme terror zone.
It is currently unclear when cryptocurrency market sentiment will turn around. But for now, the metric’s value is currently only 26, so it looks like 2023 is picking up where 2022 left off.
BTC price
Bitcoin is trading around $16,700 at the time of writing, down 1% over the past week.
Looks like the value of the crypto has seen a small rise in the last couple of days | Source: BTCUSD on TradingView
Hans-Jurgen Mager Featured Image on Unsplash.com, Chart on TradingView.com, Alternative.me
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