Bitcoin (BTC), which dropped by $6,000 in one day, has stabilised at $55,000. However, crypto market sentiment remains in shock.
According to the Crypto Fear & Greed Index (Nov. 27), emotions are at their most fearful since September.
Crypto sentiment plunges into “extreme Fear”
Fear & Greed is a method that uses a variety of factors to calculate a standard sentiment score for crypto market from 1-100. At the moment, it sits at 21.
Friday was a rough day for the metric. The score fell more than half in 24 hours, from 47 on Friday.
These two readings indicate that sentiment is shifting from “neutral” to “extreme fear”, but they do not include the “fear zone.”
Crypto Fear & Greed Index. Source: Alternative.me
Although it was expected, some familiar faces find the market turmoil amusing.
Alistair Milne, an investor and entrepreneur, noted that “extreme Fear” is not a suitable reaction to BTC/USD trading of $54,000. Fear & Greed measured 78, which is “extreme greed,” the Bitcoin spot price at mid-October.
“We are at $54k because of this much fear.” He summarized the situation as “wild.”
When the Index hit 21/100 on September 30, BTC/USD traded for $43,800 at Bitstamp.
BTC/USD 1-day candle chart (Bitstamp). Source: TradingView
Overnight reset of funding rates
Cointelegraph reported that the most severe phase of the BTC price decline was when traders on the exchanges continued to be curiously optimistic.
Despite Fridays move on Friday, funding rates were positive and showed that the market was expecting a quick recovery.
Related: Bitcoin reverses bear market at $53.5K, as Pfizer gains from new panic over coronavirus variant Nu
However, at the time of writing, Saturdays plunge to $53,500 seemed to have been enough to cause a reversal in the mood. Funding rates are now back to normal, and there is no bullish bias.
Chart of Bitcoin funding rates. Source: Coinglass
However, as Delphi Digital, an analytics firm, noted this week, funding is still lower than the first half 2021, which could indicate a lackluster overall direction.
“Funding rates remain low on futures markets. Researchers told Twitter followers that this could indicate that short-term leveraged traders remain uncertain about their direction.
“The bullish run-up at the beginning of the year was accompanied by a substantially higher funding rate.