Bitcoin Fear and Greed Index Drops 22% in Two Months, Market Cooling Ahead

Recent on-chain data has provided insights into how changing investor sentiment could impact the Bitcoin market in the coming weeks. Crypto analyst Axel Adler Jr. has highlighted that the Bitcoin market dynamics may shift significantly in the near future, based on the Bitcoin Fear and Greed Index.

The Bitcoin Fear and Greed Index is a metric that aggregates the average sentiment of investors in the BTC market. This indicator is divided into five zones: extreme fear, fear, neutral, greed, and extreme greed. Extreme fear suggests that traders and investors are exercising high caution, while extreme greed indicates an overheating market with new positions being flooded in. Historically, periods of extreme fear have been correlated with market bottoms, and price corrections typically occur during extreme greed.

According to Adler Jr., the 90-day simple moving average (SMA) of the Bitcoin Fear and Greed Index has declined by approximately 22 percentage points over the past two months. This decline has shifted the BTC metric from extreme greed to a more moderate level of greed. Adler Jr. further noted that if the index drops by another 10 to 15 points in the near future, the market may experience a cooling-off period. During this time, participants could become accustomed to negative factors, and emotional price movements may subside.

Adler Jr. estimated that at the current pace, it may take approximately 4 to 6 weeks for the index to drop by an additional 10–15 points. The analyst also pointed out that the 30-day (monthly) moving average of the Fear and Greed Index appears to be reaching a local bottom, similar to the level seen at the end of the Bitcoin price correction to $54,000. Historically, when the Fear and Greed Index monthly SMA reached this level, the premier cryptocurrency climbed to a new all-time high price. If this pattern holds, investors could see the BTC price break out of its consolidation range.

As of the latest update, the price of BTC is just beneath the $84,000 level, reflecting a 0.5% decline in the past 24 hours. This current price level and the potential cooling-off period in the market suggest that investors should closely monitor the Bitcoin Fear and Greed Index for further insights into market sentiment and potential price movements.