The popular Bitcoin Fear and Greed Index has plunged deep into a state of “extreme fear” amid the ongoing carnage in the cryptocurrency market. In fact, the metric is at its lowest since the COVID-19 crash.
extreme fear becomes the new norm
The crypto markets took a massive turn at the end of March to get off to a bad start. At the time, bitcoin was riding higher, near $50,000, and the community wondered if it would be able to break that level and even head for a new ATH.
However, this was not the case, and BTC entered its longest negative streak. The cryptocurrency closed the next nine weekly candles in the red and meanwhile lost over $20,000 in value.
It was around $30,000 for a while but started falling again last Friday. The weekend brought more pain, and so did the week. As a result, bitcoin fell by over $20,000 earlier today, marking its lowest price since December 2020.
Somewhat expected, this predominantly bearish trend resulted in a drastic change in investor beliefs and market observation. This is best presented by the Bitcoin Fear and Greed Index – a metric that determines overall sentiment by assessing a variety of data, such as volatility, surveys, social media comments, and more.
It displays final results ranging from 0 (extreme fear) to 100 (extreme greed). Since the beginning of May, the index has been deep inside “extreme fear”. The last few days saw another drop in the metric, which now shows 7 – the lowest position since the COVID-19 pandemic.
Down to $13K or Bounce-Off?
Whenever such extreme price volatility hits the market, analysts rush to provide their predictions as to what will happen next. Based on his predictions on BTC’s recently formed double top, veteran derivatives trader Peter Brandt says that bitcoin is on the way to fall even further, indicating a short-term bottom just above $13,000.
Conversely, another popular analyst – Will Clemente – sees the crash as a buying opportunity as the dormancy flow metric has fallen to its all-time low. It describes the average number of days each spent coin was idle before finally running out.
As the chart below shows, once the metric turns down, BTC starts a short- to medium-term rally.
Lowest reading ever on dormancy flow.
Either this signal is broken and this timing is different or it is one of the best accumulation opportunities ever for BTC. pic.twitter.com/hDThFVllHj
— Will Clemente (@WClementeIII) 14 June 2022
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