Market sentiment fluctuated widely this year due to the volatility of crypto markets. There were some market ups and downs. The multiple bulls run and the subsequent dips and crashes that followed were a unique year for investors. It was a great year for some investors, even though their portfolios were in dire straits for three years. But for others, particularly those who bought at the peak of bull rallies it has been an awful year.
It has taught all investors valuable lessons. Investors learned from the transition from being incredibly bullish towards bearish that there is no such thing as a perfect time to learn. We will be looking at how sentiment has changed with the market in this report.
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Crypto Fear & Greed Index Fluctuates
Investor sentiment was at its best as the year began. Investor sentiment would continue to rise over the coming months as the market moved into extreme greed territory. Four months of extreme greed characterized the market, while faith in cryptocurrency remained high. This would soon change.
In May saw the first price drop in crypto markets. Market sentiment was also affected by it. After being in the greed zone for so many months, investors began to be wary about the market. This was true for most of the summer, as the market continued to be rocked by market-wide crashes that pushed sentiment further into the negative.
However, by spring the market was back on track and had begun to rally. Slowly, but surely the sentiment moved from fear to neutral.
Fear & Greed Index fluctuates widely in 2021 | Source: Arcane Research
August marked the beginning of a second stretch of positive sentiment after the market plunged again into greed territory. Investor favorites hit new records, and prices rallied.
This trend would not be sustained as sentiment retreated into negative territory following the September 7th crash. The Fear & Greed Index would again trend low until another rally towards the end of September brought it back up again. Market sentiment this time would be in the greed zone for quite some time, before it reversed.
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Investors who are mostly seasoned have used tools like the Fear & Greed Index to profit off the crypto market this year. These investors, who are more experienced than others, have increased their investment and seen the return on their money. Arcane Research predicts that this trend will continue into 2022 and will help investors spot “buy the dip” opportunities in the coming year.
Presently, the Fear & Greed Index is trending low at around 40, indicating that investors are fearful of the market.
The crypto total market cap plummets to $2.2 trillion. Source: TradingView.com Crypto Total Market Cap| Source: Crypto Total Market Cap on TradingView.com
Featured Image from Institute of Entrepreneurship Development. Arcane Research charts and TradingView.com charts.