Data shows that the bitcoin market has been stuck in a state of extreme fear since May 5, which means that this trend of downward sentiment has been going on for over a full month now.
Bitcoin’s Fear and Greed Index Points to an Extremely Fearful Market
According to the latest weekly report from Arcane Research, the crypto market is currently going through its longest period of extreme fear since the COVID-19 crash back in 2020.
The “Fear and Greed Index” is an indicator that tells us about general investor sentiment in Bitcoin and the broader crypto market.
The metric uses a numerical scale that goes from one to a hundred to represent this sentiment. When the value of the index is less than fifty, it means that investors are scared at the moment.
Related Reading | Glassnode: 90% Of The Supply Of Bitcoin Long-Term Holders Are In Profits
On the other hand, values of the indicator above the threshold mean that investors currently share the sentiment of greed.
Range end values below 25 and above 75 indicate feelings of extreme fear and excessive greed, respectively.
Now, here is a chart that shows the trends in the Bitcoin Fear and Greed Index over the past year:
The value of the metric seems to have been very low recently | Source: Arcane Research's The Weekly Update - Week 22, 2022
As you can see in the graph above, the Bitcoin Fear and Greed Index is currently showing a value of 15, indicating that the general sentiment is that of extreme fear.
These low values of the metric have been around for over a month now. The last time such a long streak came after the COVID accident was two years ago. Then, the run went on for 48 consecutive days before noticing any improvement in sentiment.
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Historically, bottoms form during periods of extreme fear, while tops form during periods of extreme greed.
Because of this, some investors believe that the earlier period provides ideal buying opportunities for bitcoin, while the later period may be a suitable selling point.
The trading technique that follows this idea is called reverse investing. Warren Buffett’s famous quote sums it up best:
Be fearful when others are greedy and be greedy when others are afraid.
If this philosophy is anything to go by, the current sentiment could mean that now may be the time to buy bitcoin.
At the moment, it is not clear how long this cycle of extreme fear will last. It may be longer or longer than the previous one, or the sentiment may soon see an uplift.
At the time of writing, bitcoin is priced around $30.4k, down 3% over the past week.
Looks like the value of BTC has jumped back above $30k | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradngView.com, Arcane Research