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 have been 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, compared to its previous position at 47.
These two readings indicate that sentiment is shifting from “neutral” to “extreme fear”, but they miss 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 around $54,000. In fact, the Bitcoin spot price was last at these levels in October. Fear & Greed measured 78. This territory is also known as “extreme greed”.
“This much fear, and we’re at $54k. 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 Friday’s move on Friday, funding rates were positive and showed that the market was expecting a quick recovery.
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However, at the time of writing it appears that the plunge to $53,500 lows was enough to reset 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.
“Looking back on the beginning of the year, we can see that the bullish run up was accompanied by an even higher funding rate.”