Crypto Market Remained Fearful Throughout 2022, Will 2023 Be Different?

Data shows the crypto market was fearful for almost the entirety of 2022 and has so far continued the streak into the new year.

Crypto Fear And Greed Index Continues To Point At “Fear”

The “fear and greed index” is an indicator that tells us about the general sentiment among investors in the crypto market. The metric uses a numeric scale that runs from 0-100 for displaying the sentiment. When the indicator sees values above 50, it means the market is being greedy currently. On the other hand, values below the threshold suggest investors are fearful right now.

The index also has two special regions, called “extreme fear” and “extreme greed.” The former occurs when the metric assumes values lower than 25, while the latter is observed at values higher than 75.

The significance of extreme fear is that cryptos like Bitcoin have historically seen bottom formations when the indicator has been in this zone. Because of this, some traders believe extreme fear provides the best buying windows for digital assets. Similarly, tops have taken shape during extreme greed, and hence periods with such a sentiment have been the ideal times to sell.

A trading strategy called “contrarian investing” is based on this idea. Warren Buffet‘s famous quote best sums it up: “Be fearful when others are greedy, and greedy when others are fearful.”

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Now, here is a chart that shows the trend in the crypto fear and greed index over the past year:

As displayed in the above graph, the crypto market sentiment was stuck in the fear region for the entirety of 2022, with the exception of some very brief spikes into the greed zone. For much of this period, the investors were not just fearful, but extremely fearful, showing the mental toll that the long bear market took on the holders.

During this past year of rock-bottom mentality, the index observed its longest streaks ever of both fear and extreme fear. And the former streak doesn’t even seem to have ended yet, as the metric has started the year staying just above the extreme fear territory.

It’s currently unclear when the crypto market sentiment might take the turn towards betterment; but for now, it looks like 2023 is picking up right where 2022 left off, as the indicator currently has a value of just 26.

BTC Price

At the time of writing, Bitcoin is trading around $16,700, down 1% in the last week.