The Bitcoin Fear and Greed Index has returned to mostly neutral in recent days.
The values of this index can range from zero, which is total fear, to 100, which is total enthusiasm or greed, and it has been fluctuating between 40 and 56 for the past few days.
Until 21 July, the value was in the extreme fear zone, with an annual minimum peak at 10, although it had already been reached three other times in 2021, on 24 May, 30 May and 22 June.
On 27 July, however, it began to rise again, and by 28 July it was back in the neutral zone at 50.
Yesterday it was still at 48, while today it is at 42. However, it should be remembered that the index measures the situation in the last 24 hours, and the latest update is from this morning.
Bitcoin Fear and Greed Index is 42 – Fear pic.twitter.com/Url8vuVk55
— Bitcoin Fear and Greed Index (@BitcoinFear) August 4, 2021
It is worth noting, for example, that the current price of bitcoin, at around $39,000, is in line with that of 21 May, when the fear and greed index was at 21. So in a little less than two and a half months, market sentiment seems to have changed considerably.
What does the fear and greed index show?
According to some analysts, this could be a bullish signal, because it has been consistently below 40 since 13 May. It should be noted that at that time the price of BTC was just under $50,000.
It is also worth mentioning that in 2021 the fear and greed index has only been in the neutral zone for short periods, the longest of which lasted about a week. It has now been in the neutral zone for nine days, although last year it was in the neutral zone for a whole month in September.
The interesting thing about this index is that, although it does so retrospectively, it measures the overall sentiment in the crypto markets quite well, and it does so in a way that is not arbitrary, but puts together objective data.
The fact is that, according to some recent research, crypto markets seem to be literally at the mercy of investors’ emotions. That is, they move in ways that are difficult to explain rationally, probably due to the overly emotional behaviour of those who invest in this market.
Therefore, measuring how much fear, or enthusiasm/awareness, prevails at any given time might be helpful in understanding what is going on.