By Scott Matherson, Bitcoinist.com, 2024-08-06
Over the last week, the Crypto Fear & Greed Index has seen a steady decline as prices have struggled to hold up in the market. Following the Bitcoin price crash below $50,000 that rocked the market, the index plunged farther into fear. The result of this is the lowest level that the index has been in the last two years.
Why The Crypto Fear & Greed Index Is Important
The Crypto Fear & Greed Index uses a number scale of 1-100 to represent the market sentiment at any given time. This scale measures a number of indicators such as social media keywords, market volatility and volume, and dominance in the market.
With the data collected, the index uses numbers to represent whether investors are feeling fearful, greedy, or neutral and to what extent they are feeling this. A score of 1-24 represents Extreme Fear, which is usually the period following a market crash, and investors are very careful. This is followed by 25-46, representing Fear, just a bump up from Extreme Fear.
Then, from 47-53 is what is known as the Neutral level. This means at the time, investors are not particularly too interested in the market. Above it is the 54-74 level representing Greed. At this point, investors are beginning to get back into the market. Lastly, is the Extreme Greed at 55-100, showing that investors fully in the market.
Now, where the index can be a good tool in pointing investors to the right time to invest. Usually, when markets are fearful, sitting in Extreme Fear, can often present the best buying opportunities with low price. On the flip side, a score in the Extreme Greed territory could signal that the market is about to top, meaning it's time to sell.
What The Current Score Of 17 Means
At the time of writing, the Crypto Fear & Greed Index is sitting at a score of 17, putting it in the Extreme Fear territory. While this is not the first time that the Crypto Fear & Greed Index is dropping into Extreme Fear this year, the current level is interesting because it is the lowest it has been in two years.
The last time the Crypto Fear & Greed Index dropped this low was in July 2022, following a market crash that saw the Bitcoin price go from $55,000 to below $20,000. However, this was a great buying opportunity as the Bitcoin price hit a new all-time high less than one year later.
Going by the age-old investment saying “buy when there is blood in the streets,” meaning buy when others are fearful, the current level could be a good entry point for investors. If the market maintains its trend, the crypto prices could be choppy for a few months, but eventually lead to a notable rally in the long term.
