Data shows that the Bitcoin fear and greed index has been pointing to fear lately, something that could keep buyers away from the Halloween effect.
Bitcoin shows fear and greed indicators fear
The BTC Fear and Greed Index is an indicator that measures market sentiment and emotions based on various sources and displays them on a numerical meter.
The metric uses a system with a value of 0-100, where lower values intimidate the market and higher greed.
Extreme fear and greed occur when the indicator shows too low or too high a value, respectively. When Bitcoin turns red it usually occurs during times of fear, while during times of greed it is seen during large steps.
Here’s how the Fear and Greed Index recently looked, according to a recent Arkansas Research Report:
The Bitcoin market continues to show fear | Source: Arcane Research
Last week the index slowly started moving towards greed as the market recovered from the September 7 crash. However, before the level of greed hit, the feeling quickly turned to fear because BTC had another crash.
Related Reading | Despite the dips, bitcoin exchange reserves have reached their lowest levels since 2018.
The fear and greed needle points at fear currently | Source: Arcane Research
The chart below shows last month’s trend in bitcoin prices, highlighting the crashes that led to this frightening situation.
BTC's price continues to fall down | Source: BTCUSD on TradingView
Over the past few days, Bitcoin has had two big dips where the price of the first has dropped to 40 40.5k, while the second has dropped to 39 39.6k. These have only entered into the feeling of fear.
Will this level of fear deter shoppers from the Halloween effect?
The Halloween Strategy is a trading method based on the notion that stocks, bitcoin and other assets work best between October 31st and May 1st.
Traders using the strategy usually recommend “sell out in May”, until the next Halloween arrives.
Because of this perception, buyers generally see this time of year as the optimal entry point to the market. This is sometimes dubbed as the “Halloween effect”.
The effect is a strange statistical inconsistency because the data over a period of several years suggests that trading strategies seem to yield better results.
Related Reading | Mid-cap Altcoins hold higher altitudes than Bitcoin and Etherium
Next month is Halloween, but what effect will this time have on buyers? Since the fear and greed indicators are currently causing fear among traders, investors may be hesitant to enter the market right now.
If the market continues to be intimidating within the next month, perhaps the Halloween effect will not benefit BTC this year.