Bitcoin Greed Index Drops to Neutral as ETFs Are Unable to Support Pricing

The Crypto Fear and Greed Index has recently dropped back to neutral levels, a status not seen since October 2023. This shift comes just days after the historic approval of spot Bitcoin ETFs in the United States.

Source: vietnaminsider.vn

As per the index, Bitcoin's current market sentiment score is at 52 out of 100, marking its lowest score since October 19 of the previous year when Bitcoin traded at an average daily price of approximately $31,000. The change occurred within a week after the Crypto Fear and Greed Index briefly entered an extreme greed score of 76, reflecting the market's anticipation of spot Bitcoin ETF approvals.

The Crypto Fear and Greed Index evaluates market sentiment daily by considering data from six key performance indicators: volatility (25%), market momentum and volume (25%), social media (15%), surveys (15%), Bitcoin's dominance (10%), and trends (10%). Despite Bitcoin's surge to $49,000 within 24 hours of the SEC's approval of spot Bitcoin ETFs, its price dropped to $41,500 by January 12 as traders took profits. As of the latest update, Bitcoin has somewhat stabilized around $42,200, according to TradingView data.

Amid the launch of spot Bitcoin ETFs, uncertainty has surrounded their performance, leading to conflicting data and a lack of detailed information about these new investment vehicles. Google Trends reveals a significant 1,100% surge in searches for “Why is Bitcoin dropping?” as market participants seek explanations for recent Bitcoin price movements.

Data analysis indicates that the BTC futures funding rate has maintained stability at a modest 0.2% per week since January 4. This suggests a balanced demand for leverage between long (buy) and short (sell) positions, implying that the recent sell-off wasn't driven by retail traders using excessive leverage or betting on a price decline. Traders can assess market sentiment by examining whether more activity involves call (buy) options or put (sell) options. A put-to-call ratio of 0.70 suggests that put option open interest lags behind more bullish calls, indicating a bullish sentiment. Conversely, a ratio of 1.40 favors put options, suggesting a bearish outlook.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.