The crypto market is currently in a state of ’extreme fear,’ according to the Crypto Fear & Greed Index, a key gauge of market sentiment. This negative sentiment has persisted for over two months, impacting price action.
In Short #
- The crypto market is in a state of ’extreme fear,’ according to the Fear & Greed Index.
- This fearful sentiment has been dominant for over two months and occurred in more than 30% of measurements over the past year.
- Understanding this market emotion can help investors make rational choices and avoid panic selling.
Extreme Fear is the Norm #
The Fear & Greed Index is currently at 16, indicating ’extreme fear.’ This score suggests that caution among investors is very high, which can lead to low buying appetite and increased selling pressure.
This state of fear is not an exception. Over the past year, the index pointed to ‘fear’ or ’extreme fear’ in more than 30% of cases.
What Does the Index Measure? #
The index is designed to measure the emotions and sentiment of the crypto market. Its goal is to indicate whether the market is driven by greed, which can lead to irrational buying frenzies and price increases, or by fear, which often results in mass sell-offs.
By providing insight into market psychology, the index helps investors make more rational decisions and avoid emotional reactions, such as panic selling or FOMO-driven purchases.
The current period of fear has dominated sentiment for over two months. This trend began after the so-called ‘October liquidation crash.’ Since that market decline, the crypto market has not shown any significant recovery.
Broader Market Context #
A similar sentiment is visible in the U.S. stock markets. The CNN Fear and Greed Index for stocks is at 42, which also points to ‘fear.’ Meanwhile, the S&P 500 index is trading only a few percent below its record high.
For the crypto market, the situation is different. Bitcoin, the largest cryptocurrency, is trading almost 30% below its all-time high of $126,000.