Market sentiment shifts, cryptocurrency fear and greed index drops below the low to 28

According to the latest data from Alternative, the cryptocurrency market’s Fear and Greed Index rose to 28 on January 2nd, a significant rebound from the previous day’s 20, marking a gradual recovery of market sentiment from the depths of extreme fear.

Components Behind the Index Rise

This indicator is not based on a single dimension but is a composite weighted by multiple market aspects. Volatility and trading volume each account for 25%, jointly forming half of the index, reflecting changes in market activity levels. Social media buzz and market survey questionnaires each contribute 15%, capturing real-time sentiment and expectations of market participants. Bitcoin’s dominant position in the overall market and Google Trends analysis account for 10% each, tracking the influence of mainstream cryptocurrencies and global search interest changes.

Transition from Extreme Fear to Fear

The index rising from 20 to 28 appears as a simple numerical change on the surface, but it actually signifies a critical psychological turning point in the market. Moving out of the “Extreme Fear” zone indicates that investors are beginning to reassess market opportunities. While fear has not completely dissipated, it is no longer the overwhelming dominant force. This gradual emotional recovery often signals that the market may enter a new phase of exploration.

The Greed Index and Fear Index often move inversely. When the market escapes extreme emotions, it usually creates space for rational decision-making. Currently, the index is in the “Fear” zone but shows signs of recovery. This intermediate state warrants close attention from market participants.