The Crypto Fear and Greed Index, a metric used to track the sentiment of crypto investors, has registered a "greed" score for the first time since the significant $19 billion liquidation event in October that caused many traders to exit altcoin positions.
In an update provided on Thursday, the index reported a rating of 61. This score reflects an improvement in overall market sentiment following weeks characterized by "fear" and "extreme fear." The index had risen to 48 just the day prior, placing it within the "neutral" zone.
Investor sentiment in the crypto market experienced a sharp decline on October 11, following the liquidation of $19 billion from crypto markets. In the subsequent period, the index recorded some of its lowest ratings ever, frequently dipping into the low double digits during November and December.
Sentiment indexes are occasionally utilized by crypto traders as a tool to assess the market and inform their investment decisions, helping them determine whether current conditions are favorable for buying, selling, or remaining on the sidelines.
Bitcoin Reaches Two-Month High Amidst Improving Sentiment
The general market sentiment has begun to improve, coinciding with a rally in Bitcoin (BTC). Over the past seven days, Bitcoin has seen a significant increase, climbing from $89,799 to reach a two-month high of $97,704 on Wednesday, according to data from crypto aggregate CoinGecko.
The last time Bitcoin traded above $97,000 was on November 14. At that time, however, the Fear and Greed Index was in a state of "extreme fear" as Bitcoin experienced a decline from its all-time highs.
The Crypto Fear and Greed Index derives its ratings from an analysis of various market indicators. These include price fluctuations of major cryptocurrencies, trading volume, market momentum, trends observed in Google searches, and the general sentiment expressed by traders on social media platforms.
Bitcoin Holders Reducing Holdings: A Positive Indicator
Analysts from the market intelligence platform Santiment indicated in an X post on Wednesday that Bitcoin holders have been selling off their holdings over the last three days. This resulted in a net decrease of 47,244 holders, suggesting that "retail had been dropping out due to FUD & impatience."
The analysts further explained, "When non-empty wallets drop, it's a sign that the crowd is dropping out, a good sign. Similarly, less supply on exchanges decreases the risk of a selloff." They added that "This price bounce has also been supported by a 7-month low 1.18 million Bitcoin on exchanges."
Typically, a low amount of Bitcoin available on exchanges is considered a bullish signal. This is because traders are more inclined to hold their assets in wallets, making them less likely to engage in rapid selling.