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Home Cryptocurrency news

Despite Cryptocurrency Market Recovery, Sentiment Is Still Extremely Fearful

Tony Spilotro by Tony Spilotro
12 months ago
in Cryptocurrency news, Bitcoin
Reading Time: 3min read
cryptocurrency extreme fear
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Now that the dust has settled on the historic, record-breaking collapse the cryptocurrency market experienced earlier this month alongside the stock market, gold, and many other traditional assets, Bitcoin and altcoins have begun to recover.

But although cryptocurrency prices are recovering across the board, according to the crypto market Fear and Greed Index, sentiment is still in extreme fear. Does this mean it’s a time to be greedy while the market is fearful, or is the fear so extreme that taking a new position is dangerous?

Cryptocurrency Market Rebounds, But Sentiment Remains in the Gutter

Because cryptocurrencies are speculative assets, and much of their valuations are derived from hype and promise, investor sentiment is especially important.

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And because it is such an important factor, a Fear and Greed Index was designed to track investor sentiment and help to make sense out of that sentiment reaching extremes of fear or greed.

Related Reading | How Fear and Greed in the Crypto Market Can Lead To Incredible Profit 

The index is typically so accurate in representing the emotional state of the market, that it has been used successfully as a trading strategy.

Oftentimes, taking a contrarian position against the market, enormous profits can be made. As the famous Warren Buffett saying goes, it is wise to be fearful while others are greedy, and greedy when others are fearful.

And with the market in such extreme fear, that old adage would suggest that now is the time to buy Bitcoin with everything you’ve got, as fear as never been more extreme.

Not just within the crypto market, but fear is currently everywhere in the world. The coronavirus is a black swan event that’s caused such mass disruption and death, that the entire world is terrified of not only the pandemic itself, but the potential economic fallout that could last for decades as the world recovers.

Because fear is so extreme, both inside and outside of the cryptocurrency market, it’s wise to stay extra cautious when considering any investments or trades right now, and additional risk management strategies should be applied.

It's interesting to see how Bitcoin has recently reached $6700 but market sentiment is still extremely fearful$BTC #Crypto #Bitcoin pic.twitter.com/IgsVzjmqN1

— Rekt Capital (@rektcapital) March 24, 2020

Coronavirus Causing Extreme Fear Means Crypto Investors Should Proceed With Caution

However, reaching extreme fear doesn’t always coincide with a price increase. The last time fear was this extreme, was in August 2019, when Bitcoin was trading above $10,000. In the month following, Bitcoin suffered a $2,000 drop.

That drop didn’t even bring sentiment back to the extreme fear it saw just a month prior, even despite one of the largest drops of the year taking place.

Related Reading | Is the Coronavirus The Black Swan Event That Crushes Cryptocurrency? 

What’s undeniable, however, is that extreme fear can cause investors and markets to react irrationally. And because there is so much unpredictability due to the coronavirus, its best to play it safe and proceed with caution.

Tags: bitcoincryptocryptocurrencyfear and greed indexsentiment
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellent. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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