Crypto Stayed Fearful Through 2022, Will 2023 Be Different?
Data shows the crypto market was fearful for almost the entirety of 2022 and has so far continued the streak into the new year.
Crypto Fear And Greed Index Continues To Point At “Fear”
The “fear and greed index” is an indicator that tells us about the general sentiment among investors in the crypto market. The metric uses a numeric scale that runs from 0-100 for displaying the sentiment. When the indicator sees values above 50, it means the market is being greedy currently. On the other hand, values below the threshold suggest investors are fearful right now.
The index also has two special regions, called “extreme fear” and “extreme greed.” The former occurs when the metric assumes values lower than 25, while the latter is observed at values higher than 75.
The significance of extreme fear is that cryptos like Bitcoin have historically seen bottom formations when the indicator has been in this zone. Because of this, some traders believe extreme fear provides the best buying windows for digital assets. Similarly, tops have taken shape during extreme greed, and hence periods with such a sentiment have been the ideal times to sell.
A trading strategy called “contrarian investing” is based on this idea. Warren Buffet‘s famous quote best sums it up: “Be fearful when others are greedy, and greedy when others are fearful.”
Related Reading: Peter Schiff Says Get Ready For Worse Inflation, What Does This Mean For Bitcoin?
Now, here is a chart that shows the trend in the crypto fear and greed index over the past year:
The value of the metric seems to have gone completely stagnant in recent months | Source: Alternative
As displayed in the above graph, the crypto market sentiment was stuck in the fear region for the entirety of 2022, with the exception of some very brief spikes into the greed zone. For much of this period, the investors were not just fearful, but extremely fearful, showing the mental toll that the long bear market took on the holders.
During this past year of rock-bottom mentality, the index observed its longest streaks ever of both fear and extreme fear. And the former streak doesn’t even seem to have ended yet, as the metric has started the year staying just above the extreme fear territory.
It’s currently unclear when the crypto market sentiment might take the turn towards betterment; but for now, it looks like 2023 is picking up right where 2022 left off, as the indicator currently has a value of just 26.
At the time of writing, Bitcoin is trading around $16,700, down 1% in the last week.
Looks like the value of the crypto has seen a small rise in the last couple of days | Source: BTCUSD on TradingView
Featured image from Hans-Jurgen Mager on Unsplash.com, charts from TradingView.com, Alternative.me
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