As the cryptocurrency market continues to fall, so does the extreme fear. What motivated the sell-off? Is it Omron? Or Evergrande? Is it a conspiracy? Or is it a holiday? All these questions and more have kept the Fear and Greed Index pointing to the left for a month. What does it mean? Where do we go from here? This is what we want to explore.
But first, let’s talk about the fear and greed index. As one of many Bitcoin indicators, it measures the overall sentiment of the current market. Zero is extreme fear. One hundred is extreme greed. And the indicator oscillates between the two at any given time. It is said that the cryptocurrency market is very emotional. The Fear and Greed Index aims to prevent investors from making irrational decisions based solely on emotions.
Fear And Greed Index shows Extreme Fear | Source: Arcane Research’s The Weekly Update
What is the Fear and Greed Index now talking about?
according to Weekly updates from Arcane Research, The fear has come:
“The Fear and Greed Index has now issued a signal of “fear” or “extreme fear” for nearly a month. The last time we saw such a long period of fear in the market was in early summer, when market sentiment had continued for more than two months. People are afraid. As Bitcoin continues to consolidate, the excitement in late autumn has diminished, and the overall mood seems very negative at present.”
The report also stated that “during the period of stable selling, Bitcoin tends to outperform the overall crypto market.” This time is no exception. BTC “outperformed all indexes so far in December, and in the second week of this month After trading relatively flat, there was a negative return of -18%.” On the other hand, “the small-cap index fell by nearly a third in December.” What does this usually mean?
“Bitcoin’s dominance rose by 1.13% last week. This is the third time we have seen Bitcoin’s dominance reach the bottom of 40% in 2021. The last two times were on May 19 and September 13 It seems that the 40% threshold is an unsustainable area for alternatives.”
BTC price chart for 12/15/2021 on Eightcap | Source: BTC/USD on TradingView.com
What can we expect?
In order to get our technology and on-chain analysis, let’s hand over the microphone to this month’s Fear and Greed Index Newsletter:
“One of the main factors here is the cyclical support band. We cannot ignore the fact that Bitcoin has just closed below the market support range for two consecutive weeks. Historically, this means that we will see a longer period before the trend is truly reversed. The point of integration is that as long as Bitcoin’s closing price this week is below the cyclical support band, we should not expect any major breakthroughs in the price.”
However, every dog has his own day. A week ago, analyzing a very similar market sentiment, NewsBTC informs you:
“According to some analysts, the “fear and greed” index of extreme fear levels has historically bottomed out locally before the crypto market. However, as the macroeconomic outlook becomes more complex, new highs may encounter obstacles.”
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It’s also important to remember that just two months ago, we were in a similar situation, Emotions made a complete 180 In a few weeks.
“The indicator fell all the way to extreme fear on September 30, but in less than two weeks, sentiment has rebounded back to extreme greed. The report pointed out that this shows how fast the sentiment of the cryptocurrency market is changing.”
That being said, and disclaimer this is not financial advice, in this case, we can only say one thing…queue!
Featured Image: PublicDomainPictures on Pixabay| Charts by TradingView