The crypto market has once again been able to recover above $1 trillion after a market rally triggered by the Ethereum merge. This has resulted in more positive market sentiment from investors, allowing the Fear and Greed Index to move out of the extreme fear zone. Such a surge in sentiment can often bring positive news for digital assets in the space.
Index goes into fear
Now, despite the positive volatility in sentiments, the Crypto Fear and Greed Index remains in the fear zone. However, it is a welcome development from last week’s close of 22. With a current score of 34, the index has hit a near one-month high, which shows a significant difference in the way investors viewed the market last week compared to this week.
Nevertheless, the market sentiment is still down from last month. The month of August was quite a good month for the market, with Bitcoin reaching $25,000, and Ethereum reaching $2,000. Finally, the Fear and Greed Index had moved into a neutral 47, the highest in four months.
However, with the recent developments on Tuesday morning, the market sentiment is likely to return to the zone of extreme fear. After the release of CPI data, which came in at just 0.1%, the crypto market reacted poorly.
Market cap drops below $1 trillion | Source: Crypto Total Market Cap chart from TradingView.com
The price of bitcoin fell sharply from the mid-$22,000s to under $22,000, losing over $1,000 in a matter of minutes. At this point in time, the cryptocurrency market cap has lost over $40 billion, although it still remains above $1 trillion.
Will the crypto market recover?
The crypto market is currently suffering from a combination of sharp growth and some negative news. The market was already expecting a correction, but the CPI data pushed it lower than expected.
However, bitcoin continues to show support above $20,000. So if this level remains, there is a possibility that there will be a sharp bounce which will lead to another market correction. This largely depends on the ability of the digital asset to hold $20,000-$20,800. Failure to hold could result in the price of bitcoin falling below $20,000. However, if it holds, there is a possibility of a climb above $22,000.
At the time of writing, bitcoin is currently trading at $20,900, down 6.08% over the past 24 hours.
Featured image from Bitcoinist, chart from TradingView.com
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