The Crypto Market Sentiment is Improving, with the Crypto Fear & Greed Index Moving to "Neutral" (47)

This shift comes as Bitcoin climbed 5.5% in the past few days, reclaiming the $88K mark. At press time, Bitcoin has settled around $87,647.

The crypto market sentiment has been improving, with the Crypto Fear & Greed Index moving to “neutral” (47) today, after spending the past week in “fear” territory.

This shift comes as Bitcoin (BTC) price climbed 5.5% in the past few days, to reclaim the $88K mark. At press time, Bitcoin has settled around $87,647. Experts link this to increased institutional investments and signals from the Federal Reserve (Fed) about future rate cuts.

However, market participants are actively debating whether this signals the beginning of a renewed bullish phase or simply represents a temporary pause in the market’s characteristic volatility.

What Factors Led to the Improved Market Sentiment?

The Fear & Greed Index returning to a neutral reading showcases a more balanced perspective within the crypto market. This shift follows a significant surge in institutional capital flowing into the sector.

Reports from last week indicate that over $500 million has been invested in Bitcoin alone since the beginning of last week.

Moreover, the QCP Capital Broadcast highlighted that this sentiment shift aligns with a broader easing of risk aversion in the crypto market. The firm suggested that the sharp reversal of net outflows from Bitcoin ETFs, with 8,775 BTC ($744 million) purchased last week, signaled early signs of liquidity rotating back into crypto.

The rebound also coincided with a strong recovery in equity futures. However, despite this positive momentum, QCP Capital is maintaining a degree of caution.

The firm's analysis of the options market showed that activity levels remain moderate, indicating a neutral “wait-and-see” stance from traders. Additionally, they observed a downward trend in implied volumes and risk reversals remained stable throughout the period.

How is the Federal Reserve’s Policy Impacting Crypto?

Last week’s Federal Open Market Committee (FOMC) meeting saw the Fed keep interest rates at 4.25% to 4.5%. The Fed also announced plans to begin scaling back its quantitative tightening program starting in April, a move that traders viewed as an indirect form of easing.

QCP Capital believes that Chair Jerome Powell’s remarks helped calm investor concerns about a potential recession. While outside forecasts had increased the probability of a downturn, Powell maintained that the risk remained moderate.

The firm stated that the Fed’s economic outlook was revised downward, with growth projections reduced to 1.7% for 2023. Conversely, inflation expectations rose to 2.8%, sparking concerns about stagflation.

What Are Analysts’ Takes on This Market Turnaround?

The shift of the Fear & Greed Index to Neutral has sparked mixed reactions, with some analysts seeing it as a potential buying opportunity.

However, others are cautioning that the market remains fragile and could easily swing back into fear.

Crypto trader and analyst Crypto Van described this range of 40 to 50 as “sneaky accumulation” territory. He explained that it’s the zone where we can expect to see more institutional investors accumulating Bitcoin in anticipation of a larger move.

Additionally, Altucard noted that traders are typically hesitant in this neutral zone. They are neither fearful enough to sell in panic or optimistic enough to buy with full conviction.

Furthermore, X user Guru drew a comparison, suggesting that the market is currently like a “coiled spring.” He opines that the direction of Bitcoin will likely determine the fate of altcoins in the coming days.