Extreme fear has engulfed the cryptocurrency market amid heightened volatility, resulting in most digital assets trading in the red zone for the better part of 2022.
As of May 17, the Crypto Fear & Greed Index, which serves as a cross-market sentiment gauge, has hit a score of 8 out of 100, its lowest value since March 2020, a period the coronavirus pandemic inspired a market meltdown.
The index is critical in the cryptocurrency community since it indicates the general market sentiments highlighting what to expect in price movement. Higher readings suggest that greed has taken over the market, and there are many buyers.
Elsewhere, lower readings indicate that investors are skeptical of getting involved in the crypto market with minimal sellers involved.
The current extreme fear can be interpreted as a radical change in the sentiment of cryptocurrency market participants, which could signal a significant market trend reversal. In recent weeks, the index has recorded dramatic drops after hitting a high score of 60 for 2022.
Will Bitcoin hold $30,000 spot?
The extreme fear comes despite Bitcoin making minor gains trading above $30,000. By press time, the asset was trading at $30487, surging over 2% in the last 24 hours. There is general anticipation that if Bitcoin fails to hold the $30,000 level, it might result in further losses, potentially provoking more selling.
Despite the recent massive correction, Bitcoin entered May on a brighter note after jumping past the $40,000 mark. The development emerged following the Federal Reserve’s move announcing that it would raise interest rates by 50 basis points instead of 75. However, the market went into fear after the gains were short-lived.
Since the start of the year, Bitcoin has primarily skewed towards the fear zone, but the recent downward price movement has pushed the market into an acute panic.
There is still uncertainty in the market about the next price action amid renewed crypto regulation debate in the aftermath of the TerraUSD collapse. In this case, investor sensitivity to any adverse development in the market could push the crypto sector into further turmoil.
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