Crypto fear and greed index hits ‘neutral’ as Bitcoin ETFs fail to raise prices

Five days after the US Securities and Exchange Commission approved a spot Bitcoin ETF, the market sentiment towards the alpha cryptocurrency has fallen to a “neutral” reading on the Crypto Fear and Greed Index, reaching the level for the first time in three months.

The Index has had a rating of 52 over the past 24 hours, its lowest since October 19, 2023. This was back when Bitcoin traded at a daily average of $31,000. Over the past week since the Bitcoin ETF announcement, Bitcoin has been down 2.9% and is now trading at the $42,500 level.

The Crypto Fear and Greed Index tracks investor sentiment toward crypto markets from 0 to 100. The Index identifies extremes that may signal trading opportunities by monitoring fear versus greed in market sentiment. For example, low readings indicating panic selling could flag buy entry points, while high readings suggest possible price bubbles.

Data for the Index is weighed based on six key market indicators: volatility (25%), market momentum and volume (25%), social media (15%), surveys (15%), Bitcoin’s dominance (10%) and trends (10%).

Though not a specifically predictive system, when combined with other indicators, the Crypto Fear and Greed Index helps investors gauge crowd behavior by avoiding emotional decision-making based solely on sentiment.

Such an outlook enables more informed trading choices between crypto’s boom and bust cycles. Given how it provides a macro perspective on crypto market psychology over time for traders, the Index may signal buy opportunities just as excess greed levels could foreshadow impending price corrections.

There is uncertainty around the impact of Bitcoin ETFs, and the long-term effects of increased institutional crypto access remain unclear. So far, data on Bitcoin ETFs has been conflicting, making it difficult to determine trends. Notably, Bitcoin has also entered a decoupling phase with the Nasdaq-100, signaling crypto’s growing divergence from equity markets.

While Bitcoin ETFs were initially seen as a milestone, their actual impact on market dynamics and prices remains ambiguous, as evidenced by the neutral sentiment reflected in the Crypto Fear and Greed Index.