The index uses a numeric scale that runs from one to hundred for representing the sentiment. All values above the “50” point signify greed, while those below the cutoff imply the market is fearful right now.
Values towards the end of the range of above 75 and below 25 indicate sentiments of extreme greed and extreme fear, respectively.
Historically, bottoms have tended to form during periods of extreme fear while tops have occurred when the market is extremely greedy.
Because of this, some investors believe that buying during extreme fear and selling during extreme greed in optimal.
The last time the index reached a similar value was back in January of this year. Then, the bottom didn’t actually form until two weeks after the sentiment turned extremely fearful and Bitcoin observed another drop of 20%.
So, it’s not certain if now is the time to buy. But nonetheless, such a deep extreme fear sentiment might just be a signal for investors to look out for bottoms forming in the near future.
At the time of writing, Bitcoin’s price floats around $29.5k, down 25% in the past week.