The Crypto Fear and Greed Index, a measure of emotions in the crypto market, has declined to record its lowest figure since the November 5 election of Donald Trump as the US president.
The index which is scaled from 0 (an indication of extreme fear) to 100 (an indication of extreme greed) assists investors and traders in trying to figure out if it is fear or greed that is currently the prevailing sentiment in the market in order to, determine whether to buying and selling.
As of early today, the index stood at 70, the same level it was just before Trump emerged victorious last month.
A Sign Of Reduced Post-Trump Success Bullish Sentiment
After Trump became president-elect, the fear and greed index surged to as high as 94, indicating a high level of greed and likely overvaluation. This surge occurred prior to Bitcoin reaching an all-time high on December 17.
BTC Republic had earlier captured BTC’s surge towards $100,000 in the aftermath of the election of pro-crypto Trump.
The decline to 70 is still a reflection of a market driven by greed but with investors who are now significantly less confident than they were when the index was closer to 100. Another way to interpret the decline is that some investors are now taking greater cognizance of risks.
While an index of 90 suggests greed characterized by the unchecked search for gains, 70 indicates that investors are becoming increasingly concerned about the possibility of market corrections or bubbles.
Bitcoin traded around $95,488 early on Monday, an 8% decline from the previous week. BTC’s price is often a yardstick of investor sentiment. It increases rapidly when greed for gains prevails and falls sharply when fear leads to sell-offs.
Analyzing Bitcoin’s Christmas And New Year Price Patterns
According to James Toledano, COO of Unity Wallet, BTC historically exhibits mixed characteristics and no clear trend in periods like the forthcoming Christmas and New Year holidays.
“Its behavior is always mixed and there is zero discernible pattern at the end of the year and going into the next,” observes Toledano.
Sometimes the price rises in the new year and at other times it falls. So, historically, we can say that Bitcoin exhibits typically mixed behavior over Christmas and New Year.
He compares the coin’s volatile nature and water always being wet. For him, BTC will always remain volatile just like wetness will always be an attribute of water.
He also notes that lower liquidity may heighten volatility and that significant institutional participation could bring about asset price stability. However, there can be exceptions to these during years when market catalysts or macroeconomic news induce sudden changes.
Toledana goes on to add that,
This year, much depends on investor sentiment following 2024’s ETF approval and the Trump factor as well as other macro trends. A relatively quiet period is possible unless unexpected news reignites volatility. But given that on Jan 20th, pro-Bitcoin Trump will be back in the White House, I think we can expect a lot of price movement again very soon.
