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Currently, the cryptocurrency market is going through one of the longest periods of negative sentiment in its history. The market has been in the Extreme Fear zone for 45 straight days, according to the Crypto Fear and Greed Index.
Extreme fear is prevalent
This is a concerning milestone that indicates a high level of investor uncertainty. Right now, the index is in the Extreme Fear range at about 15. This range has historically indicated a market that is characterized by caution, risk aversion and waning confidence.
The duration of the fear, in addition to its intensity, is what makes the current situation unique. In cryptocurrency markets, prolonged episodes of intense fear are uncommon. Instead, they usually alternate between optimism and panic more rapidly.
The price performance of Bitcoin shows why sentiment has declined so dramatically. After a recent decline that saw prices drop into the mid-$60,000 range earlier in the year, the top cryptocurrency is now trading close to $71,500. Even with the comeback, the overall pattern still shows that the market is having difficulty picking up steam following a sharp decline from earlier highs.
Long-term performance of Bitcoin
Technically, Bitcoin is still below a number of significant resistance indicators, such as long-term moving averages, which have traditionally served as trend-defining levels. The market will probably continue to see uncertainty and erratic price action until Bitcoin can firmly reclaim these zones.
Extreme fear frequently manifests following sharp drops in the market or during times of intense selling pressure. In this instance, a number of factors have contributed to the protracted decline in the cryptocurrency industry, including liquidations, declining liquidity and waning investor sentiment.
Particularly impacted are altcoins. The perception that the market is currently in a defensive phase, rather than getting ready for an immediate recovery, is reinforced by the fact that many major assets have lost a significant portion of their value during the recent correction.
But historically, periods of significant accumulation have also been associated with extreme fear. Extremely low sentiment frequently indicates that a significant amount of speculative capital has already left the market.
Dan Burgin
Vladislav Sopov
