Weeks of ‘Extreme Fear’ Leave Bitcoin Investors Guessing Market’s Next Move

Providing the measure of the market’s feeling is Alternative.Me’s Crypto Fear and Greed Index. Whereas typically sentiment is almost as changeable as the price of Bitcoin itself, the index has been consistently reading “Extreme Fear” since the start of the breakdown earlier this month.

‘Extreme Fear’ Continues to Hang Over Cryptocurrency Industry

As BeInCrypto reported earlier this month, Bitcoin and cryptocurrency markets have been particularly volatile of late. Having started 2020 in a clear upward trend, many analysts had celebrated the rising prices as indicative of Bitcoin’s growing acceptance as a safe-haven asset during times of global uncertainty. This all changed over March 12-13. The breakdown of an agreement between OPEC and Russia saw oil prices tank, taking just about every other asset on the planet down with it. Bitcoin was no exception, and even gold investors seemed spooked by the plunging markets set against the backdrop of the coronavirus pandemic. Since the drop, which saw Bitcoin actually break below $4,000 on some exchanges, the price somewhat bounced back and, for now at least, the bleeding seems to have stopped. Even despite this partial recovery, the plunge appears to have decimated market sentiment.  One popular measure of how cryptocurrency investors are feeling about the market is the Crypto Fear and Greed Index by Alternative.Me. The index looks at market volatility, trading volume and momentum, social media engagement, how dominant a coin is vs. the rest of the cryptocurrency market, and survey results to come up with a measure of sentiment. 

Bitcoin Fear and Greed Index is 10 – Extreme Fear pic.twitter.com/uNtMURWYVR

— Bitcoin Fear and Greed Index (@BitcoinFear) March 30, 2020

Alternative.Me collates the data to produce both a numerical score out of 100 and a descriptor. The higher the number, the “greedier” investors are. Meanwhile, a low reading indicates a scared market. The descriptors range from “Extreme Fear” to “Fear,” “Neutral,” “Greed” and “Extreme Greed”. The Crypto Fear and Greed Index has been reading “Extreme Fear” now since sentiment plunged in tandem with prices earlier this month. This is the longest the metric has ever consistently read “Extreme Fear” ever.

How Long Can Investors Remain Fearful?

The Crypto Fear and Greed Index takes cues from a famous quotation by legendary investor and Bitcoin naysayer Warren Buffett. The Berkshire Hathaway CEO described his own investment thesis in simplistic terms in a shareholder letter in 1986:

“… simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

According to Alternative.Me’s website, traders can use the Fear and Greed Index to influence their own buying and selling of crypto assets. That said, although the market has been in a state of “Extreme Fear” for weeks now, there is absolutely no way of telling just how long such uncertainty will abound for. With more than $7 billion worth of stablecoins sitting on cryptocurrency sidelines, it’s clear that not everyone has it in them to “be greedy when others are fearful.” With some analysts calling Federal Reserve policy a trillion dollar advertising campaign for Bitcoin and others calling for lower prices, it remains to be seen how long “Extreme Fear” will hang over the industry.