Fear is Dominating the Market, Investor Sentiment Plummets

The recent collapse of the crypto market has pushed investor sentiment into the "extreme fear" zone relative to Bitcoin's fear and greed index.

The index, which ranges from 1 to 100, has levels such as “extreme fear,” “fear,” “neutral,” “greed,” and “extreme greed” to gauge how investors feel about the market. The index is currently at level 23 and reflects the deep sense of fear among investors.

Interestingly, when the index reaches extreme levels, it often signals a potential price swing in the opposite direction. Historically, when the index enters the zone of extreme fear, it often marks a market bottom followed by a price recovery. For example, in August the index fell to 20 before the price of Bitcoin briefly recovered.

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Despite this possible signal of a bottom, however, a recovery may not be imminent. Historically, September has been a bearish month for Bitcoin, with negative returns recorded.

Looking ahead, October typically brings more positive market action. If historical trends continue, the crypto market could recover after the end of September, providing some hope for investors facing the current downturn.

Alexander Stefanov