Buying opportunity? – Bitcoin sentiment barometer indicates „fear“ again for the first time

The Crypto Fear and Greed Index suggests that bitcoin investor sentiment has shifted from „extreme greed“ to „fear“.

After Bitcoin (BTC) temporarily slipped below US$29,000 yesterday, a key crypto market sentiment barometer has now also fallen back to October 2020 levels.

Accordingly, the so-called „Crypto Fear and Greed Index“ abruptly dropped to a value of 40 today, 22 January, which downgrades the sentiment from „extreme greed“ to „fear“, so to speak. This value was last reached on 3 October 2020, when Bitcoin was still at US$10,500.

Annual chart of the Crypto Fear and Greed Index. Source:
The crypto sentiment barometer works similarly to comparable instruments in the stock market. The „Fear and Greed Index“ literally measures the two most important moods of investors, namely „fear“ (Fear) and „greed“ (Greed).

As explains, „extreme fear“ indicates that investors are particularly anxious when the price is falling, which often creates a good buying opportunity. On the other hand, if investors are too „greedy“ when prices are rising, then a downturn is usually imminent.

This has proven true again now, because before the index slipped to 40, a value of 95 was still recorded on 6 January, attesting to „extreme greed“, before Bitcoin climbed to a new record high of 42,000 US dollars on 8 January. Following the logic of the sentiment barometer, the crypto market leader has since fallen back to 28,750 US dollars.

Bitcoin’s rebound has made some experts feel called to make new negative predictions. For example, Scott Minerd, the head of investment at Guggenheim Partners, said yesterday, 21 January, that the cryptocurrency will slide as low as 20,000 US dollars. Nevertheless, he is sticking to his long-term price target of 400,000 US dollars.

Mike Novogratz of Galaxy Digital, meanwhile, is confident that Bitcoin will soon be on the rise again. He tweeted yesterday: „We humans can’t handle trading volumes of 150%. That was clear. As soon as the volume drops again, we’ll form a bottom and then the uptrend will continue.“

At the time of going to press, Bitcoin has, after all, climbed back up to US$31,000. In the last 24 hours, the price has fallen by more than 10 %, but it has still gained more than 30 % in the last 30 days.