The crypto market has been on what can only be described as a rollercoaster recently. This has put investors through the wringer and pushed even the most seasoned investors to the edge of their seats. Patience has never been more important than it is now as market sentiment continues to crash into the negative. Taking a look at the charts shows just how turbulent the last couple of months has been in the market.
The Flashes And The Dips
2021 was a great year for crypto. Growth has never been this big both popularity-wise and value-wise for the digital assets in the space. Nonetheless, this has come with its own hurdles that investors have had to jump through. These have come in the way of crashes and dips that have rocked the market at various times. Some effects of which the market is still reeling from.
One of the most notable dips happened in May of 2021. This came on the heels of the first bull rally that began in late 2020. This rally which had started with a slow buildup had blown up, seeing bitcoin reach its first peak at $64K.
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The next one had been in September of the same year, once again coming hot on the heels of another bull rally. The market had been able to recover without much problems from this dip though. This time, touching a new all-time high of $69K.
Total market cap at $1.8 trillion | Source: Crypto Total Market Cap on TradingView.com
A month after hitting this new all-time high, a crash had rocked the market that sent shockwaves through the entire market. This December 4th crash saw bitcoin lose over $10k in one day and the broader crypto market saw $200 billion shaved off. The effects of this crash have carried into the new year, where dips have continued to be the order of the day.
Crypto Market Sentiment
With every bull and bear trend, there have been similar patterns in market sentiment. The Crypto Fear & Greed Index is a tool used to measure investor sentiment and the index has pointed towards the same levels with each crash and dip.
During bull rallies, the time of high prices, the index moves into the greed territory. This happens because investors see the gains in the market, becoming more confident with putting money into the digital assets. Whereas during bear trends, the index has fallen into the fear territory as investors become wary.
Sentiment falls to extreme fear | Source: Arcane Research
Currently, the index is sitting at a low score of 22, which puts it directly in the Extreme Fear bracket. This simply means that investors are not putting their money into the market. Rather, more investors are choosing to sell off their holdings or waiting to see what the market does before buying.
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However, an important trend to note is periods of prolonged extreme fear usually precede a bull rally. It was the case in July and September. And if history were to repeat itself, then another bull rally might be on the horizon.
Featured image from PaxForest, chart from TradingView.com
