Bitcoin Recovers, But Fear & Greed Remains In Extreme Fear

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Data shows the Bitcoin Fear & Greed Index has remained inside the extreme fear zone despite the asset’s recovery back above $72,000.

Bitcoin Fear & Greed Index Still Has An Extremely Fearful Value

The “Fear & Greed Index” is an indicator created by Alternative that tells us about the average sentiment present among traders in the Bitcoin and wider cryptocurrency markets.

The index determines the investor mentality using the data of these five factors: trading volume, market cap dominance, volatility, social media sentiment, and Google Trends. To represent the sentiment, it makes use of a numerical scale running from zero to hundred.

All values above 53 on this scale correspond to greed among the investors, while those below 47 to a state of fear. Naturally, levels between these cutoffs imply a net neutral mentality.

Besides these three main zones, there are also two ‘extreme’ regions called the extreme fear (25 and under) and extreme greed (above 75). Historically, the extreme sentiments have held significance for Bitcoin and other digital assets: they have been where market reversals have tended to be the most probable to occur.

The relationship between market trajectory and sentiment has been an inverse one, however, meaning that extreme fear is where bottoms have often formed, while extreme greed has led to tops.

Recently, the Fear & Greed Index has been trapped inside the former of the two zones, as the chart below shows.

Looks like the value of the metric has spiked in recent days | Source: Alternative

The indicator fell into the extreme fear zone at the end of January as the Bitcoin price witnessed a crash. The bearish continuation in February drove the metric deeper into the region, hitting a low at a value of 5, which is an extremely rare level by historical standards. In March so far, the investor mood has marked an improvement, owing to the recovery that the asset has observed. The price surge during the past day, in particular, has induced a notable uplift in sentiment.

Despite the surge in the Fear & Greed Index, though, it continues to reflect an extremely fearful market, with its value sitting at 22.

The latest value of the Fear & Greed Index | Source: Alternative

Thus, it would appear that the bullish price action hasn’t yet been enough to move the market sentiment into the normal fear region. With this latest value, the Fear & Greed Index has been signaling extreme fear for the 35th consecutive day.

As mentioned earlier, extreme fear has tended to form major bottoms in the past. Considering this, the current streak could facilitate such a formation once more. It should be noted, however, that the previous bear market saw the index spend an extended period in the zone before Bitcoin and other assets turned around.

BTC Price

Bitcoin rose toward the $74,000 level during its latest rally before observing a small pullback to the current $72,300 mark.

The trend in the price of the coin over the last five days | Source: BTCUSDT on TradingView

Featured image from Dall-E, chart from TradingView.com

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