The Bitcoin Fear and Greed Index has fallen to 25, entering 'extreme fear' territory for the first time in three months, according to data from Alternative.me. The index, which ranges from 0 (extreme fear) to 100 (extreme greed), last reached this level on August 5.
Index Plummets as Price Falls
The drop in the index follows a sharp decline in bitcoin's price, which has fallen by $10,000 over the past 20 days. The index had previously surged above 70 in late August and mid-September, near extreme greed territory, but has since tumbled as market conditions deteriorated.
Factors Behind the Decline
The price drop began with a Binance hack that drove bitcoin from $81,000 to $76,000. Although the asset rebounded in the following days, the US midterm results and a Wall Street crash on Thursday contributed to further volatility. On Friday, bitcoin slipped to $74,800, its lowest level since the August breakout, before rebounding to $76,000.
What the Index Measures
The Fear and Greed Index aggregates data from several sources, including market volatility, market momentum and volume, social media bias, and bitcoin's dominance over altcoins. Surveys were previously included but have been paused. The metric is designed to reflect the emotional nature of the cryptocurrency market, which tends to fluctuate rapidly along with prices.
Historical Context
The last time the index was this low, bitcoin experienced a significant price increase in the weeks that followed. However, past performance is not indicative of future results.
