Data shows that the bitcoin market has once again plunged into a state of extreme panic as prices tumbled over the past week.
Bitcoin Fear and Greed Index Signals Extreme Market Fear
According to the latest weekly report Arcane Researchextreme fear is back in the BTC market, suggesting that now may be the time to buy.
this”Fear and Greed Index“is an indicator that tells us the general sentiment of investors in the Bitcoin market.
The index expresses sentiment using a numerical scale from one to one hundred. All values above the “50” point indicate greed, while values below the threshold mean the market is panicking right now.
Values near the end of the range above 75 and below 25 indicate extreme greed and extreme fear, respectively.
Historically, bottoms have tended to be formed during times of extreme fear, while tops have occurred during times of extreme greed in the market.
Because of this, some investors believe it is optimal to buy when you are extremely fearful and sell when you are extremely greedy.
Related reading | Long-term Bitcoin holders capitulate in panic
Contrarian investing is a way of trading that follows this philosophy. This philosophy is best summed up in a quote from Warren Buffett:
Be fearful when others are greedy, and be greedy when others are fearful.
Now, here is a chart showing the trend of the Bitcoin Fear and Greed Index over the past year:
The value of the indicator seems to have plunged down in the last week | Source: Arcane Research's The Weekly Update - Week 18, 2022
As you can see in the chart above, the Bitcoin Fear and Greed Index now has a value of 10, which indicates that sentiment has dropped to extreme greed.
The report states that since COVID collapse Back to March 2020.
As mentioned earlier, this sentiment often leads to buying opportunities. However, even so, it’s not a sure buy signal.
Related reading | Will Mercury Retrograde Bring Bitcoin Sentiment Shift?
The last time the index reached a similar value was in January of this year. Then, it wasn’t until two weeks after the market sentiment became extremely fearful that a bottom really formed and Bitcoin fell another 20%.
So, not sure if Now Time to buy. But nonetheless, such deep and extreme fear may just be a signal that investors are focusing on the formation of a near-term bottom.
As of this writing, price of bitcoin Floating around $29,500, it’s down 25% over the past week.
Looks like the price of the crypto has observed a sharp drop today | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, Arcane Research