Investor Sentiment Sees Sharp Positive Spike Following Crypto market Recovery

The crypto market has been able to recover above $1 trillion once more after the market rally that was triggered by the Ethereum Merge. This has resulted in more positive market sentiment from investors, causing the Fear & Greed Index to move clear of the extreme fear territory. Such spikes in sentiment can often spell positive news for the digital assets in the space.

Index Moves Into Fear

Now, even with the positive movement in sentiment, the crypto Fear & Greed Index continues to remain in the fear territory. However, it is a welcome development from last week’s close of 22. With a current score of 34, the index has risen near one-month highs, showing a significant difference in how investors viewed the market last week compared to this week.

Nevertheless, the market sentiment is still down from where it was last month. The month of August was a rather good one for the market, where bitcoin had reached as high as $25,000, and Ethereum had clocked out at $2,000. In the end, the Fear & Greed Index had moved into a neutral 47, the highest it had been in four months. 

However, recent developments on Tuesday morning are likely to send market sentiment back into the extreme fear territory. Following the release of the CPI data, which came in at just 0.1%, the crypto market reacted poorly.

Market cap drops below $1 trillion | Source: Crypto Total Market Cap chart from TradingView.com

Bitcoin’s price had dropped sharply from the mid-$22,000s to below $22,000, losing more than $1,000 in a matter of minutes. The crypto market cap lost more than $40 billion dollars in this time, although it continues to hold above $1 trillion still.

Will Crypto Market Recover?

The crypto market is currently suffering from the aftermath of a combination of sharp increases and some negative news. A correction was already expected from the market, but the CPI data had pushed it farther down than expected.

However, bitcoin continues to show support just above $20,000. So if this level holds, it is likely that there will be a sharp bounce leading to another market recovery. This is largely dependent on the digital asset’s ability to continue to hold the $20,000-$20,800. A failure to hold will likely see bitcoin’s price back down below $20,000. If it holds, though, then a climb above $22,000 is likely.

Bitcoin is currently trading at $20,900 at the time of this writing, down 6.08% in the last 24 hours.

Featured image from Bitcoinist, chart from TradingView.com

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