The crypto market has been in turbulence this week, and this has caused the Bitcoin Fear and Greed Index to drop to 21. This metric shows that the crypto community is in a state of “extreme fear” of further price dips.
It is the first time in two months when this index has shown a state of extreme fear among crypto investors. This revelation comes when the price of Bitcoin fell to lows of below $40,000 from highs of $48,000. However, Bitcoin has shown signs of recovery, as it is currently trading at around $44,000.
Market Developments Cause Extreme Fear
The crypto market is not the only one facing uncertainty, as setbacks have also been reported across the broader financial markets. The recession has been attributed to the debt crisis at the Evergrande Company in China. It is not the first time that the price of Bitcoin is responding to occurrences in the traditional financial market, as institutional adoption has grown in recent years.
On September 20, Bitcoin dipped to below $40,000, but dip-buying saved the price, which recovered shortly after. However, the price trend has caused worry among Bitcoin investors.
The Bitcoin Fear and Greed Index is used to establish the sentiments of the Bitcoin community towards the asset. On September 22, the index showed the community was in a state of “extreme fear”. This sentiment was last reported on July 21, when the price of Bitcoin dropped to below $30K.
Changes in the Bitcoin Fear and Greed index are caused by Bitcoin’s price action, volatility, social media hype, trends in the broader market, market dominance and trading volumes.
This index is not only used to establish community sentiments towards Bitcoin but also other cryptocurrencies. Currently, Ethereum’s index lies at 27, which is also a “fear” territory. This comes after Ethereum dropped to lows of below $3000.
Time to Buy the Dip?
Despite the “extreme fear” phrase sounding like a warning shot to Bitcoin investors, some experts believe that when this metric is recorded, it presents an ideal time to buy the asset. Some investors take advantage of the situation when other traders sell to buy more and take advantage of the low prices.
The third-largest Bitcoin whale address is using the price correction to accumulate more coins. When Bitcoin fell to $40,000, the mysterious whale address purchased an additional $13 million worth of Bitcoin, increasing his holdings to over 112,000 coins.
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