Data shows that Bitcoin investor sentiment has dropped to its lowest level since mid-October. Here is what this means for BTC prices.

The Bitcoin Fear and Greed Index has recently declined.

"The Fear and Greed Index" is an indicator created by Alternative, which informs us about the overall sentiment present among traders in the Bitcoin and cryptocurrency markets in general.

This index takes into account data from five factors to calculate its value: volatility, trading volume, market capitalization dominance, social media sentiment, and Google Trends.

When the index value is above 53, it means that the overall sentiment of most investors is greed. On the other hand, when the index is below 47, it indicates that fear is prevailing in the industry. Naturally, an index between these two thresholds indicates a net neutral sentiment.

Here is the current situation of the Bitcoin Fear and Greed Index:

As can be seen above, the latest value of the indicator is 65, implying that investors share a greedy sentiment. This is a sharp drop compared to the level of the index yesterday, as the chart below shows.

Even ignoring the drop over the past day, it is clear that the Bitcoin Fear & Greed Index has been trending downwards for some time. The reason behind this decline in sentiment is the price drop that BTC has recently experienced.

The index value was 73 yesterday, quite close to a special area known as extreme greed. The market is said to maintain this sentiment when the index is at 75 or higher.

For most of this month, the indicator has actually been in this zone due to the hype about cryptocurrency reaching a new high above $100,000.

Traditionally, Bitcoin tends to move in the opposite direction to the crowd's predictions; the likelihood of such a counter-movement increases as investors become more certain about a particular direction.

Extreme greed is a zone where peaks often occur for BTC prices as this potential is strongest there. There is also a similar zone for fear, known as extreme fear, which occurs at 25 or lower.

With Bitcoin sentiment significantly declining recently, this asset may no longer be at risk of seeing another major correction. However, sentiment remains greed, so another price surge is also unlikely.

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