Market Sentiment Dangerously Negative As Crypto Fear Index Drops To Two-Year Low

Crypto market sentiment has dropped into the far negative once more. This has been one in the making ever since the Terra crash had begun and investors had scrambled to leave the market. A culmination of this and speculations that the market is headed into one of the longest bear trends ever recorded has now seen sentiment fall to levels not recorded since 2020.

In The Extreme Fear Region

Now, the crypto market sentiment has not been positive for a while. Most of the last two months have been spent in the fear territory and April had closed out in extreme fear. Nevertheless, the scores on the Fear & Greed Index had remained somewhat high until the LUNA crash. This has sent the market into extreme fear overdrive as the Fear & Greed Index now displays a score of 12, the lowest it has been in two years.

Related Reading | Bitcoin, Ethereum Exchange Inflows Suggest Sell-Offs Are Far From Over

More notable is the fact that the index had touched as low as 8 last week. This makes it the second-lowest score that has ever been recorded on the index, the lowest being a score of 5 in 2018. What had followed from its May 17th lows was a bit of a recovery but even that had not held up well. As of the time of writing, the index has lost another point and is now sitting at 11. 

Market sentiment falls to extreme greed | Source: Arcane Research

This extreme fear reading mirrors how investors are feeling when it comes to investing in cryptocurrencies at the moment. Simply put, investors do not want to put money into the market and this is evidenced by the exchange inflows that have been rocking the space. These exchange-wide sell-offs only contribute to the already declining sentiment, sending digital assets further down.

Is It Time To Buy Crypto?

Historically, when the crypto market sentiment has declined this much, it can be seen as an opportunity to get into the market right before recovery. This has worked out many a time for investors. But there have also been times when it hasn’t returned exactly what was expected. Namely, the downtrend had continued even when market sentiment was in the extreme fear territory.

Total market cap recovers to $1.25 trillion | Source: Crypto Total Market Cap on TradingView.com

Nevertheless, this is still regarded as one of the easiest buy indicators of all time. It is incredibly popular due to the fact that traders and investors will often try to use market sentiment to gauge when the bottom of the market is in and get in at the right moment.

Related Reading | Institutional Investors Seek Safe Haven In Crypto Products Amid Market Uncertainty

These are mainly used for the leading cryptocurrencies in the market such as Bitcoin and Ethereum since they are easier to track. But like with anything in a highly volatile market such as the crypto market, there is no such thing as an exact science. So while ‘buying the blood’ can yield good results, they can easily go bad. 

Featured image from The New York Times, charts from Arcane Research and TradingView.com

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