Bitcoin (BTC) may have avoided further losses since falling to $17,600 last month, but sentiment is at the bottom.
Now, a classic indicator of the mood of the cryptocurrency market is showing how much the average investor has suffered.
70 days of “extreme fear”
Yes ok cryptocurrency market sentiment was already “comparable to a funeral” before the start of 2022, the subsequent price drop of Bitcoin and altcoins produced a cooling like never before.
This has now been quantified by the Crypto Fear & Greed Index, a tool that takes into account multiple sources to create a global score of how the markets feel.
As of July 15, Fear & Greed has spent 70 days at its lowest stretch – “extreme fear” – marking a new record low.
The index consists of five tranches, the others being “fear”, “neutral”, “greed” and “extreme greed”.
A score of less than 25/100 on its normalized scale corresponds to “extreme greed”, and it is this score zone that has characterized the last two months. The last time the market was more bullish than “extreme fear” was on May 5, days before the Terra (LUNA) debacle, now called the Terra Classic (LUNC).
Commenting on the data, Philip Swift, creator of on-chain analytics platform LookIntoBitcoin, noted that this period of “extreme fear” is longer even than those surrounding the 2018 Bitcoin bear market and the Bitcoin cross-market crash. March 2020.
Fear & Greed Index: we have now had the longest ever period of Extreme Fear…70days!!!
Live chart: https://t.co/Jr5151zN7I
Potential for a near-term reversal for #bitcoin soon? pic.twitter.com/thyUtLeRP9
— Philip Swift (@PositiveCrypto) July 15, 2022
2022, despite its bearish overtones, has not been without exuberant phases. The last time the index was in its “greed” or “extreme greed” zone – which usually suggests an overheated market – was in March of this year.
Studies point to a “potential breakout signal”
As for what could help Bitcoin and altcoins recover, research firm Santiment, meanwhile, believes cryptocurrencies’ correlation with traditional assets needs to come down.
Although it’s already falling BTC must continue to strike out on its own and avoid the knee jerk reaction to central bank monetary tightening on inflation.
“Cryptocurrencies grow at their fastest rate when they have very little correlation with equities,” argued in a Twitter post on July 14.
“After yesterday’s CPI report, $BTC and altcoins have been rallying while the SP500 and gold are falling. If they are not correlated, that’s a good sign of a potential breakout.”
A more striking inverse correlation to the naked eye has been between cryptocurrencies and the US dollar, currently near twenty-year highs against a basket of trading partner currencies.
The US Dollar Index (DXY) continues to trade around 108 after making several highs throughout the week, TradingView data shows.
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