The Crypto Fear and Greed Index, a metric that measures the current sentiment in the bitcoin market, has fallen to "extreme fear" levels not seen since April 2020, a report Tuesday showed.
The drop in market sentiment follows the past week's plunge in the bitcoin (BTC) price to about $43,200, down from last month's record near $65,000.
The Crypto Fear and Greed Index is now at 21, down from a "greedy" level of 73 just last week, according to the report from hosting site Alternative and quoted by Arcane Research, a Norwegian analysis firm.
"The past week has been filled with fear, uncertainty and doubt, and the bitcoin price has crashed down," the Arcane analysts wrote. "In the past, an extremely fearful market like this has historically presented solid buying opportunities during bull cycles."
Other market indicators are reflecting that fear, according to Arcane:
- The so-called "Grayscale discount" has widened to a record 25%. This is the difference between the price of bitcoin, as implied by the trading level of Grayscale Bitcoin Trust shares, and the spot-market price. "If the discount becomes of sufficient size, this could post a short-term risk for bitcoin," according to Arcane. (Grayscale is a CoinDesk sister company.)
- Funding rates in the market for bitcoin derivatives turned negative. The funding rates fell below 0% on two separate occasions over the past week – during the May 12 sell-off, and again on Monday as the market reacted to Tesla CEO Elon Musk's latest comments on the cryptocurrency. "As the market headed downwards yesterday, $1 billion worth of longs got liquidated as the market turned sour." By Tuesday, according to the report, the funding rate had returned to neutral territory, according to the report.
- Short-term price volatility has climbed to the highest level since February. The 30-day volatility is now at 4.5%, indicating that the bitcoin price has been moving 4.5% every day over the past month, on average.