Investors are becoming more nervous about the crypto market due to recent market losses. Recorded on the Fear & Greed Index, it shows that this remains an incredibly frightening time for users of cryptocurrencies. It is normal for investors to become more wary in these times when digital assets prices are continuing to drop. However, this time around, the market had quickly gone into “Extreme Fear” territory with no sign of emerging anytime soon.
Are You apprehensive About Investing?
Top cryptocurrencies like Ethereum and Bitcoin had started a trend of recovery at the beginning of this month that would soon sweep over the entire market. Positive sentiment from investors returning to the market grew as prices rose. Soon after, however, the bull rally had begun to reverse and investors chose to retreat rather than risk more down.
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The Fear & Greed Index shows that the market had been on a downward sliding scale since coming out of last week which had ended with a neutral sentiment from both sides of the market. However, by Monday this was quickly changing into fear as bitcoin fell to $43K. Tuesday proved worse than Monday, when the market was in extreme fear. This led to a 20-point score.
Even though Wednesday’s score is 25, it looks better than Tuesday’s. However, this does not mean that the market will be thriving in the near term. Fear of losing more money causes investors to avoid investing in the stock market. People take profits in the market because they fear that their coins will drop further. Low momentum can cause prices to drop further than expected, which could lead to a more severe decline.
Are Cryptocurrencies at Risk?
It can be difficult to gauge how cryptocurrency markets feel about cryptocurrencies. Some people believe it’s best to stay away from the market when it is most fearful and only then invest. There are others who think the exact opposite.
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Those who subscribe to the “buy the blood” school of thought often welcome downtrends like these since it gives them the opportunity to purchase coins at a “discount.” This mainly comes down to the risk appetite of the investor.
However, the fact that the biggest rallies occurred when the market had consolidated after a decline in the price of oil is not surprising. It was this that occurred in February/early March, when the market became extremely fearful and then turned greedy quickly as prices recovered.
Source: Crypto Total Market Cap on TradingView.com| Source: Crypto Total Market Cap on TradingView.com
Featured image taken from Psychology Today. Chart by TradingView.com