Fear and Greed Index bitcoin has once again entered “extreme fear” territory, as the Federal Reserve prepares for Wednesday’s meeting to decide its next move on interest rates and quantitative easing.
At the time of writing, BTC is trading around $48,000. That’s nearly 30% below its November all-time high of $69,000.
Fear and Greed Index analyzes market sentiment and emotions from various sources. It then presents the result as a number between 0 and 100. The closer the index gets to the lower limit, the more fearful the market is at that moment. The opposite is true for greed, when people start buying bitcoin because FOMO. This metric currently stands at 26, which means there is “extreme fear” among investors.
Will the Fed accelerate the increase
interest rates?
The mainstream media is reporting on expectations for the Fed meeting, citing a reasonable likelihood that the central bank will try to curb inflation by raising interest rates sooner. As such, financial markets are poised to reiterate their investment thesis. Although that move likely won’t happen until next year, the Fed is moving quickly to prevent consumer prices from rising.
The market’s expectation of a quicker end to asset purchases is not speculative. Late last month, Federal Reserve Chairman Jerome Powell said the central bank’s bond-buying program could end earlier than planned. Such a move is being considered because of rising inflation and a more dynamic U.S. economy. He added that he and his aides would discuss whether it would be appropriate to “end the purchases a few months earlier.”
Nevertheless, the interest rate hike is a natural next step. Since the beginning of the pandemic, the Fed has kept interest rates near zero in an attempt to increase liquidity and provide relief to market participants. Overall, this dynamic has prompted investors to seek out riskier assets as their traditional investments have ceased to yield. If the Fed raises rates sooner and faster than expected, markets are expected to move toward “safe” investments.
For most investors, Bitcoin is still considered a risky product. While it has proven time and again its ability to protect them from inflation and enable true financial sovereignty for those without access to traditional banking, its early adoption stage makes many people still skeptical. So a change in market thesis could affect the BTC market as well.
This is not certain, however. Bitcoin has repeatedly demonstrated its ability to regenerate quickly. For example, after the bans in China, its network is now stronger than before. This is evidenced by the hash rate, which continues to reach new peaks.
