With the Bitcoin (BTC) price dipping below a $29,000 threshold, the investor mood is worsening and the Crypto Fear and Greed index has plunged to October 2020 levels.
On Jan. 22, the Crypto Fear and Greed index sharply dropped to a value of 40, moving the market sentiment from “Extreme Greed” to “Fear.” The index dropped to this low for the first time since Oct. 3, 2020, when Bitcoin was trading at around $10,500.
Crypto Fear and Greed Index one-year chart. Source: Alternative.me
Similar to the fear and greed indexes in the traditional markets, the Crypto Fear and Greed index is a tool that measures two of the primary emotions that influence how much investors are willing to buy crypto like Bitcoin.
According to Alternative.me, the extreme fear level can be a sign that investors are too worried, which could mean a good buying opportunity. In contrast, when investors are getting too greedy, it could be a sign that the market is due for a correction.
Indeed, prior to dropping to 40, the Crypto Fear and Greed Index topped at 95 on Jan. 6, demonstrating that investors turned very greedy amid Bitcoin hitting its all-time highs of $42,000 on Jan. 8. The Bitcoin price subsequently saw a major correction, dipping to as low as $28,750 on Jan. 21.
As Bitcoin has been suffering a sharp correction in recent days, more people in the industry have been commenting on the price moves. On Jan. 21, Scott Minerd, chief investment officer at financial services firm Guggenheim, predicted that Bitcoin is poised to drop to $20,000. The exec still believes that Bitcoin will hit $400,000 in the long-term, but not this year.
Mike Novogratz, the founder of Galaxy Digital, is confident that Bitcoin will rally again. He tweeted on Jan. 21, “Humans aren’t meant to live in 150% vol environments. That was the tell. When vol recedes will we bottom, base and resume the rally.”
At publishing time, the Bitcoin price has slightly rebounded at around $31,000. The world’s largest cryptocurrency is down more than 10% over the past 24 hours but is still up about 30% over the past 30 days, according to Cointelegraph’s Bitcoin price index.