Fear gripped the cryptocurrency market after Thursday’s red day. This is confirmed by the Bitcoin sentiment index.
Financial markets are strongly influenced by the expectations of investors, and that of cryptocurrencies is no exception.
To stay on top of the feeling of Bitcoin, Alternative.me has created a simple index that tracks the mood of investors. Thursday, October 24th, was a red day for the cryptocurrency market. According to this index, extreme fear took hold of the market expectation for BTC.
What Made Extreme Fear Seize the Sentiment of Bitcoin
At approximately 12:45 p.m. (GMT time), the Bitcoin price lost almost USD 500 in less than 15 minutes. After the volatile bearish movement, it reached a low of USD 7,293.55 during the day on Thursday, according to Bitstamp.
This fall also caused the breakdown of a strong support located at USD 7,750 that kept a small positive expectation among investors alive.
Just before the strong bearish momentum, BTC was making a slight recovery that led it to touch the psychological level of USD 8,000, and even exceed it a little bit.
The bearish movement came to reduce the price of Bitcoin by more than 8%. At the same time, fear and uncertainty took hold of retail investors.
During Thursday, the Fear and Greed index showed a sentiment of fear marked with the number 33. On Friday, October 25th, the index went on to show the number 20, which falls into the range of extreme fear.
The Fear and Greed index is designed with a simple meter that ranges from 0 to 100, where 0 means extreme fear while 100 means extreme greed.
Meanwhile, Bitcoin managed to receive resting support that kept it consolidating all day on Friday.
Using Information Provided by Fear and Greed Index
It can be seen that the price of different assets is strongly influenced by emotions.
Greed takes hold of investors when the market is bullish, which is indicated with green numbers. On the contrary, fear reigns when the red numbers are seen.
This index is of great help to get a general idea of the sentiment of Bitcoin at a specific time.
When greed arises, markets tend to correct themselves, since the price has probably been inflated by unscrupulous investors. When this occurs, the best thing is to remain aloof from it.
Although it may be found hard to believe, when fear is the one that takes hold of the feeling of Bitcoin, a good choice is to buy. This occurs because people tend to sell irrationally on a red day, and thus good prices emerge.
In fact, this should not be taken as the perfect indicator for an effective investment method. On the contrary, this is just a small indicator that may support a more complete strategy.
It is advised that people learn more about this interesting and useful index, which can help make better investing decisions. As stated above, the sentiment of Bitcoin exerts a great influence on the level of investment in the cryptocurrency market.
By Willmen Blanco