Extreme fear has dominated the bitcoin landscape for over the month and a metric is down to its lowest position in years.
Amid the ongoing massacre in the cryptocurrency market, the popular Bitcoin Fear and Greed Index has plummeted deep into an “extreme fear” state. In fact, the metric is at its lowest position since the COVID-19 crash.
Extreme Fear Becomes the New Norm
The crypto markets took a massive turn for the worse starting at the end of March. At that time, bitcoin was riding high, close to $50,000, and the community wondered if it will be able to breach that level and even head for a new ATH.
However, that was not the case, and BTC entered its longest negative streak. The cryptocurrency closed the next nine weekly candles in the red and lost over $20,000 in value in the meantime.
It remained around $30,000 for a while but started plummeting last Friday again. The weekend brought more pain, and so did the start of this week. As a result, bitcoin nosedived to just over $20,000 earlier today, which became its lowest price position since December 2020.
Somewhat expectedly, this predominantly bearish trend resulted in a massive shift in investors’ beliefs and overview of the market. This is best presented by the Bitcoin Fear and Greed Index – a metric determining the overall sentiments by gauging different sorts of data, such as volatility, surveys, social media comments, and more.
It displays the end results from 0 (extreme fear) to 100 (extreme greed). Ever since the start of May, the Index has been deep inside “extreme fear.” The past few days saw another decline in the metric, which now shows 7 – the lowest position since the COVID-19 pandemic.
Down to $13K or Bounce-Off?
Whenever such extreme price volatility hits the market, analysts rush to provide their predictions on what will transpire next. By basing his forecast on a double top that BTC formed recently, the veteran derivatives trader Peter Brandt said bitcoin is poised to drop even further, indicating a short-term bottom of just over $13,000.
In contrast, another popular analyst – Will Clemente – sees this crash as a buying opportunity since the dormancy flow metric dumped to its lowest point ever. It describes the average number of days that each spent coin had remained dormant before finally moving.
As the chart below shows, once the metric goes down, BTC tends to bounce off in the short- to mid-term.
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Jordan got into crypto in 2016 by trading and investing. He began writing about blockchain technology in 2017. He has managed numerous crypto-related projects and is passionate about all things blockchain. Contact Jordan: LinkedIn