One of the most commonly used sentiment indicators shows nothing but fear among investors
A famous fear and greed index from Alternative.me hit the lowest point since the middle of 2019 when it fell to a value of 8, something the markets have not seen since March 2020.
Such a strong drop of an indicator may cause additional fears among investors but, in fact, it should not be worrisome as it may act as a bottom indicator. Such a strong dive of the indicator was mostly caused by a spike of volatility on Bitcoin and the 100% drop of Luna altcoin, which had $30 billion in market cap prior to the drop.
Extreme Fear can actually be seen as a sign of an upcoming or already occurring capitulation, as the indicator tracks both sentiment and market metrics to determine the sentiment of crypto traders and investors.
The Fear and Greed index is often used to determine oversold/overbought states on the market, with Extreme Fear representing the oversold market and Extreme Greed an overbought market.
According to Alternative.me, the index currently measures volatility, market momentum, social media, dominance, and trends. Volatility and market momentum represented by volume have the most impact on the indicator.
Trends, social media and currently paused surveys are mostly affecting the social sentiment of traders and investors and may not accurately represent the situation on the market.
At press time, Bitcoin is back above $30,000, which still makes it fit for a potential comeback if we see a sudden surge in purchasing power. But despite easing selling pressure, BTC continues to consolidate around support with no volatile movement over the past seven days.
