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The Crypto Fear and Greed Index (CFGI) recently plummeted to its lowest value in months, signaling extreme levels of fear in the industry. The move comes after bitcoin dropped below $7,000, which brought out some of the most prominent crypto critics to spread fear, uncertainty, and doubt (FUD) around the market.

Peter Schiff, the CEO and chief global strategist of Euro Pacific Capital, entertained the idea that a head-and-shoulders pattern was developing on bitcoins chart, which could trigger a sell-off to $2,000. Meanwhile, Mark Dow, a former US Treasury and International Monetary Fund economist, affirmed that bitcoin was dying. And, Dr. Nouriel Roubini, a professor at New York Universitys Stern School of Business, called it the most useless and over-hyped technology ever.

Regardless of the pessimism, historical data shows that the current levels of fear could be a sign that the market will recover.

Over the last week, more than $56 billion were wiped off the cryptocurrency market cap. The massive downturn took many investors by surprise since the run-up to the bitcoin halving usually has a positive impact on the industry as a whole. But, this time around, BTC dropped nearly 23 percent to hit a low of $6,600 on Nov. 25.

The sudden nosedive turned the market sentiment into extreme fear, according to the Crypto Fear and Greed Index (CFGI).

This technical index evaluates the emotions and attitudes that investors have towards bitcoin. It takes into consideration several factors, including volatility, volume, social media, surveys, and market dominance. Then, the CFGI turns these viewpoints into a straightforward number. A value of 0 means extreme fear, while a value of 100 represents extreme greed.

At the moment, the CFGI is on a 21, which implies extreme levels of fear in the crypto market. This is the lowest value that this technical indicator had reached since Sept. 26, when it went into a 12.

Despite the current market sentiment, Warren Buffett, one of the top investors of all time, once said:

Be fearful when others are greedy, and greedy when others are fearful.

Based on historical data, this could be the case. Every time the CFGI goes into extreme fear, bitcoin tends to surge immediately after. On Oct. 24, for instance, this index was on a 20 indicating extreme fear, but the next day BTC skyrocketed over 40 percent to hit a high of $10,500.

According to the former senior market analyst at eToro, Mati Greenspan, the recent sell-off that the market went through triggered a massive amount of buy orders on Bitfinex, a cryptocurrency exchange headquartered in Hong Kong. He maintains that bitcoin buy positions hit their highest level since February.

It's very clear what the market thinks of this latest selloff!

Bitcoin buy positions (blue line) are at their highest level since February, while bitcoin sell positions (orange) are near their lowest level ever.

Data from @bitfinex displayed by @tradingview. pic.twitter.com/yaT0wQpGgs

Mati Greenspan (@MatiGreenspan) November 26, 2019

Along the same lines, the CEO of Three Arrows Capital, Su Zhu, believes that $6,775 was a key price point for bitcoin.

If this was bottom (6680~ish on normal venues, 6775 on bfx), then it has some similarities to the low 3k capitulation in that the low was fully absorbed by buy walls rather than culminating in a flash wick (as what happened in 2015)

Liquidity is a lot more efficient nowadays https://t.co/zSdiZU6mwe

Su Zhu (@zhusu) November 26, 2019

The economist Alex Kruger argued that the Crypto Fear and Greed Index is relatively accurate at pinpointing bottoms. Still, it does not take into consideration multiple factors that are crucial to determine the direction of the market. Therefore, time will tell whether the current state of extreme fear in the market could indeed estimate an upswing.

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Bitcoin Price Recovers Above $7,000 But Markets Shiver in Extreme Fear - CCN.com