Bitcoin Investors Less Fearful As Market Sentiment Normalizes After the Mid-May Crash

1 month ago

The general sentiment in the cryptocurrency market has normalized after the extreme fear that dominated it since the mid-May crash.

https://i0.wp.com/storage.waploaded.com/images/abbc6f556a1640173e5dc2e59d523cf5.jpg

Roughly a month after the massive mid-May market crash, when BTC crashed from over $50,000 to $30,000, the general sentiment among traders has normalized to neutral levels. The Fear and Greed index has also returned to a less fearful state.

Bitcoin Investors Less Fearful

The price of the primary cryptocurrency went through its worst market crash in terms of USD value in mid-May. Negative news coming from Tesla, Elon Musk, more China FUD, and over-leveraged positions ultimately resulted in over $20,000 evaporated from BTC’s price as the asset bottomed at $30,000.

Naturally, such adverse development caused fear and panic in the volatile crypto space. The overall sentiment plummeted to yearly lows, similarly to the situation after the March 2020 market dump.

However, bitcoin started to recover somewhat rapidly. In a matter of a month, the cryptocurrency is up by over 30% and recently reclaimed $40,000.

Crypto traders’ feelings have also normalized, according to CryptoQuant. The analytics company explored several on-chain metrics to arrive at this conclusion.

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The first such observation came from all funding rates among cryptocurrency exchanges. CryptoQuant noted that if such deposits are in negative territory, traders consider the market to be bearish and vice-versa. They were indeed deep below 0 in mid-May but have normalized around 0 in the past few weeks.

https://i0.wp.com/storage.waploaded.com/images/3cc4ee2fc77fdc92c411ee4a8d238de0.pngBitcoin Exchange Funding Rates. Source: CryptoQuant

The case with the open interest is even slightly more promising as the metric has increased after the crash, which happens when there’re new capital inflows to derivatives markets.

https://i0.wp.com/storage.waploaded.com/images/607b461bd91ace81a20f2459642eb0ed.pngBitcoin Exchanges Open Interest. Source: CryptoQuant

The “All Exchanges Estimated Leverage Ratio,” which goes up when more traders are willing to take more risks, is also up, suggesting that their confidence is back to normal levels.

https://i0.wp.com/storage.waploaded.com/images/5f72764fef580312a46045b61fd82a82.pngBitcoin Exchanges Estimate Leverage Ratio. Source: CryptoQuant

Fear and Greed Supports

The Fear and Greed index is a popular monitoring resource calculating various types of data, including volume, social media, surveys, and volatility. Consequently, it provides the investors’ general sentiments towards the current BTC market landscape.

The results range from 0 (extreme fear) to 100 (extreme greed) and tend to move with the most recent price developments. As such, the index had dipped to well within an extreme fear state in mid-May at 11, which was the lowest point since March 2020.

Despite still being in a fearful state, it has normalized quite a bit and is currently well above 30. It even spiked to 38 yesterday as BTC reclaimed $40,000.

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