Bitcoin fear and greed index flashes ‘caution’ – Everything you need to know!

• Bitcoin’s Fear and Greed Index should be closely watched for clues on trading decisions
• This moment could set the stage for the next major market shift

Bitcoin [BTC] has once again entered a volatile phase, with the Fear and Greed Index flashing a crucial signal for traders on the charts.

At press time, BTC was well under $80,000, struggling to regain any momentum after a sharp sell-off from its $97,000 peak. The question now is – Does greed signal a deeper dip, or is fear about to take over?

Are traders following the “buy the fear” playbook?

Bitcoin’s sharp 17% drop to below $80k this week pushed the Fear and Greed Index into “extreme fear” – A reading of 20. This marked the first time in two years that the market has entered such a deep red territory.

Source: BGeometrics

In previous cycles, Bitcoin has either staged a swift recovery as traders capitalized on the discounted prices or endured prolonged fear-driven sell-offs, pushing the index even lower. 

However, buying BTC at $16k is a world apart from buying it at $80k. 

This can be reflected in the outflows – When BTC was at $16k, total outflows soared past 70k. With BTC at $80k, outflows sat at just 14.2K. 

That being said, the 13% uptick in outflows from the previous day suggested that traders may be stepping in to buy the dip, potentially establishing the $80k – $82k zone as a key demand area.

If this trend continues, the Fear and Greed Index could shift back towards the “fear” zone. Historically it has been a precursor to price rallies. 

This would hint at the potential conclusion of the heavy distribution phase. In other words, the market may be nearing a turning point where selling pressure starts to ease.

Bitcoin’s future – What the fear and greed index reveals

Currently, with Bitcoin in the “extreme fear” zone, the market is at a critical inflection point. 

If selling pressure subsides and buying activity increases, the index could shift towards a more neutral or greed-based stance, potentially triggering a bullish reversal.

In previous cycles, it’s the fear-of-missing-out combined with high-risk greed that has sparked explosive rallies, driving Bitcoin well past key psychological levels like $100k. 

However, Bitcoin’s 1D chart isn’t signaling this shift just yet. In fact, the MACD flipped bearish and the volume turned negative – A sign that selling momentum remains largely intact.

Source: TradingView (BTC/USDT)

With the Fear and Greed Index potentially sliding even lower, the risk of further downside increases. In this environment, a retest of the $78k support level becomes a high probability.