Investor sentiment sees a sharp positive increase following the recovery of the crypto market

The crypto market has been able to recover over $1 trillion again after the market rally triggered by the Ethereum merger. This has resulted in more positive market sentiment from investors, causing the Fear & Greed index to move away from the extreme fear zone. Such spikes in sentiment can often spell positive news for the digital assets in the space.

Index moves into fear

Now, even with the positive movement in sentiment, cryptofear & Greed Index continue to remain 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 risen near one-month highs, showing a significant difference in how investors viewed the market last week compared to this week.

Nevertheless, market sentiment is still lower than last month. The month of August was quite good for the market, where bitcoin had reached as high as $25,000 and Ethereum had clocked out at $2,000. Finally, the Fear & Greed index had moved to a neutral 47, the highest it had been in four months.

However, the latest developments on Tuesday morning are likely to send market sentiment back into the extreme fear zone. After the release of the 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

Bitcoin’s price had fallen sharply from the mid-$22,000s to below $22,000, losing more than $1,000 in a matter of minutes. The crypto market capitalization lost more than $40 billion in this time, although it still remains above $1 trillion.

Will the crypto market recover?

The crypto market is currently suffering from the aftermath of a combination of sharp increases and some negative news. A correction from the market was already expected, but the CPI data had pushed it further down than expected.

However, bitcoin continues to show support just above $20,000. So if this level holds, it is likely to be a sharp pullback leading to another market recovery. This is largely dependent on the digital asset’s ability to continue holding $20,000-$20,800. A failure to hold is likely to see bitcoin’s price fall back below $20,000. If it holds, a rally above $22,000 is likely.

Bitcoin is currently trading at $20,900 at the time of writing, down 6.08% in the last 24 hours.

Featured image from Bitcoinist, chart from TradingView.com

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