Market Sentiment Dangerously Negative As Crypto Fear Index Drops To Two-Year Low

Crypto market sentiment has dropped into the far adverse as soon as extra. This has been one within the making ever for the reason that Terra crash had begun and traders had scrambled to go away the market. A end result of this and speculations that the market is headed into one of many longest bear developments ever recorded has now seen sentiment fall to ranges not recorded since 2020.

In The Extreme Fear Region

Now, the crypto market sentiment has not been optimistic for some time. Most of the final two months have been spent within the worry territory and April had closed out in excessive worry. Nevertheless, the scores on the Fear & Greed Index had remained considerably excessive till the LUNA crash. This has despatched the market into excessive worry overdrive because the Fear & Greed Index now shows a rating of 12, the bottom it has been in two years.

Related Reading | Bitcoin, Ethereum Exchange Inflows Suggest Sell-Offs Are Far From Over

More notable is the truth that the index had touched as little as 8 final week. This makes it the second-lowest rating that has ever been recorded on the index, the bottom being a rating of 5 in 2018. What had adopted from its May seventeenth lows was a little bit of a restoration however even that had not held up nicely. As of the time of writing, the index has misplaced one other level and is now sitting at 11. 

extreme fear crypto

Market sentiment falls to excessive greed | Source: Arcane Research

This excessive worry studying mirrors how traders are feeling when it comes to investing in cryptocurrencies in the meanwhile. Simply put, traders don’t need to put cash into the market and this is evidenced by the trade inflows which were rocking the house. These exchange-wide sell-offs solely contribute to the already declining sentiment, sending digital belongings additional down.

Is It Time To Buy Crypto?

Historically, when the crypto market sentiment has declined this a lot, it may be seen as a chance to get into the market proper earlier than restoration. This has labored out many a time for traders. But there have additionally been occasions when it hasn’t returned precisely what was anticipated. Namely, the downtrend had continued even when market sentiment was within the excessive worry territory.

Crypto total price chart from TradingView.com

Total market cap recovers to $1.25 trillion | Source: Crypto Total Market Cap on TradingView.com

Nevertheless, this is nonetheless considered one of many best purchase indicators of all time. It is extremely common due to the truth that merchants and traders will usually attempt to use market sentiment to gauge when the underside of the market is in and get in on the proper second.

Related Reading | Institutional Investors Seek Safe Haven In Crypto Products Amid Market Uncertainty

These are primarily used for the main cryptocurrencies out there akin to Bitcoin and Ethereum since they are simpler to monitor. But like with something in a extremely risky market such because the crypto market, there is no such factor as a precise science. So whereas ‘buying the blood’ can yield good outcomes, they can simply go unhealthy. 

Featured picture from The New York Times, charts from Arcane Research and TradingView.com

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