Bitcoin Fear & Greed Index Has Seen A Decline Recently: Here's What This Could Mean For BTC's Price

Data shows the Bitcoin investor sentiment has plunged to the lowest level since the middle of October. Here's what this could mean for BTC's price.

The Bitcoin Fear & Greed Index has seen a sharp decline recently, dropping from a value of 73 yesterday to 65 today. This indicates that the sentiment shared by the majority of the investors has shifted from extreme greed to simply greed.

The index takes into account the data of five factors in order to calculate its value: volatility, trading volume, market cap dominance, social media sentiment, and Google Trends.

When the value of the index is greater than 53, it means the sentiment shared by the majority of the investors is that of greed. On the other hand, it being under 47 implies fear is dominant in the sector. Naturally, the indicator being between these two cutoffs suggests a net neutral mentality.

Bitcoin Fear & Greed Index 2021

The worsening in the sentiment is likely due to the price decline that BTC has been going through lately. For most of this month, the indicator has actually been showing the market to be holding a sentiment of extreme greed, which is defined as the index being at 75 or higher.

Historically, Bitcoin has actually tended to move in the direction opposite to what the crowd is expecting, with the probability of such a contrary move occurring only growing the more the investors become sure about a side.

Extreme greed is a territory where tops have often occurred for the BTC price as this likelihood is the strongest there. There is a similar region for the fear side as well, called extreme fear and occurring at 25 or lower.

With the Bitcoin sentiment seeing a notable decline recently, the asset’s price may no longer be at risk of seeing another major correction. The sentiment is still that of greed, however, so another rally may also not be too likely to happen.