Cryptocurrency traders remain fearful amid the market’s muted recovery, according to a popular index
Crypto Fear & Greed Index Says Cryptocurrency Market Sentiment Remains in territory of “extreme fear”. It takes into account several factors, such as volatility, social media posts, and trading volume, to determine what investors and traders think of the current state of the market.
The index enters fear territory when it drops below 50. Most recently, it printed a score of 25, which indicates “extreme fear.” The index gauges cryptocurrency traders’ emotions on a daily basis.
Market sentiment has seen a significant shift in just two weeks. In late March, the index posted “greed” for the first time in four months after the flagship cryptocurrency hit a new 2022 high of $48,234.
The recovery ended up being a flash in the pan. Earlier this week, Bitcoin plunged below $40,000 for the first time since March 16 amid worries that the U.S. Federal Reserve has adopted an even more aggressive monetary tightening policy to deal with high inflation.
There is a group of contrarian traders and investors who tend to buy fear, defying the general sentiment of the market. Legendary investor Warren Buffett once said that you have to be greedy when others are scared. However, the “buy low, sell high” mentality does not always work as expected in crypto. Buying down can often backfire, as traders can simply catch a falling knife.
No matter how low Bitcoin goes, one should keep in mind that it could always go lower in a “max pain” scenario. There have been several occasions when the index plunged below 10 after brutal selloffs.
Alternatively, there could be a period of royal and painful consolidation. As reported by U.Today, legendary trader Peter Brandt predicted that Bitcoin could see years of limited trading.
