Crypto Fear & Greed Index hits 100-day low as Bitcoin drops below $40,000

The Crypto Fear & Greed Index, a widely watched indicator of sentiment in the cryptocurrency market, has reached a 100-day low as Bitcoin (BTC) struggles to maintain its price following the recent approval of spot exchange-traded funds (ETFs) in the United States. 

On January 24th, the index dropped to a score of 48, signaling a shift into the “Neutral” sentiment range. This represents a two-point drop from the previous day and a 15-point decline just a week ago when the sentiment was firmly in the “Greed” category.

The Crypto Fear & Greed Index, which evaluates market sentiment using six key performance indicators, saw its score plummet to 48 on January 24th. This starkly contrasts the optimism in the market just a week prior when the index registered a “Greed” sentiment score. The current score of 48 is the lowest it has been in the past 100 days, dating back to October 16, 2023, when Bitcoin was trading slightly above $28,500.

What comprises the Crypto Fear & Greed Index?

The index derives its sentiment score by analyzing various factors and assigning weights. The key components include volatility (25%), market momentum and volume (25%), social media (15%), surveys (15%), Bitcoin’s dominance (10%), and trends (10%). These elements collectively gauge the overall mood in the cryptocurrency market, influencing investor sentiment and decision-making.

Bitcoin, the flagship cryptocurrency, reached a two-year high of nearly $47,000 on January 8th, shortly before multiple spot Bitcoin ETFs were approved in the U.S. However, since these new ETF products were introduced, Bitcoin’s price has experienced a notable decline, falling below the $40,000 mark.

One ETF, particularly the Grayscale Bitcoin Trust (GBTC), has seen significant outflows, with over $2 billion withdrawn since its conversion into an ETF. These outflows have contributed to a series of days with net outflows from the 10-spot Bitcoin ETFs.

Sentiment shift from Greed to Neutral

The Crypto Fear & Greed Index reveals a remarkable shift in market sentiment, transitioning from a prolonged period of “Greed” starting late October, driven by optimism surrounding spot ETF approvals, to the current state of “Neutral.” 

On January 1st, the day following the approval of several Bitcoin funds, the index reached a score of 76, marking its highest point since it last peaked at 77 on November 11, 2021, following Bitcoin’s all-time high of over $69,000.