Bitcoin Fear and Greed Index Shows Market Sentiment is Reset, Ready for the Next Push

Bitcoin [BTC] was trading at $98k after the recent correction from $108k to $92.5k. This saw the Bitcoin Fear and Greed value drop to neutral

Bitcoin [BTC] began the week in a consolidation phase after dropping to lows of $92.5k on the 22nd of December. The recent sell-off saw the cryptocurrency lose support at $108k, and traders were left wondering whether BTC would attempt another push toward the all-time highs.

The sell-off also saw the Bitcoin Fear and Greed value drop to neutral levels after being in the extremes of ‘Extreme Fear’ and ‘Extreme Greed’ over the past few weeks. At press time, the F&G value stood at 56.

Bitcoin Fear and Greed Index drops from ‘Extreme Greed’ to ‘Neutral’

After spending a majority of November in the ‘Extreme Fear’ zone, the Bitcoin Fear and Greed Index rose sharply. By the 11th of November, the F&G value reached ‘Extreme Greed,’ where it remained for almost a month. During this period, BTC rose by 24.6%.

However, the bullish sentiment began to drop on the 12th of December, reaching ‘Neutral’ levels by the 23rd. This signaled a shift in the market sentiment, which could be attributed to the recent sell-off.

As a rule of thumb, buying when the sentiment is fearful and selling when it is greedy is generally advised. But during strong trends, like the one we saw over the past month, greedy readings can be accompanied by strong market-wide gains.

Open Interest dropped sharply as speculators hesitated to go long

One of the other key metrics used to gauge the Bitcoin Fear and Greed sentiment is the Open Interest. According to Coinglass, BTC OI dropped from $68.13 billion to $60.21 billion in the past nine days.

This massive drop in OI signaled that speculators were hesitant to go long on BTC futures. It also highlighted a lack of enthusiasm among futures market participants bullish on Bitcoin.

🔎 Derive optimal trading strategies from OI data with Coinglass! Try advanced crypto trading tools now.

Bitcoin’s mean coin age reverses after a two-month downtrend

While the sentiment across the market cooled down, there were some positives for BTC. One of the key accumulation metrics- mean coin age, had been trending down from late September to mid-December.

However, this trend began to reverse over the past ten days, signaling accumulation, which was a strong bullish sign. It showed that older coins were being held onto.

The 90-day MVRV ratio was at 9.46%, showing that on average, holders within this time window were at a decent profit. Despite being in the green, the 90-day MVRP ratio has been trending downward for nearly six weeks.

This highlighted that selling pressure from short to medium-term holders’ profit-taking would likely have a minimal impact in the coming days. Together, these clues signaled that Bitcoin was gearing up for another push.