Definition ∞ An extreme fear signal indicates a period of heightened investor anxiety and pessimism within the cryptocurrency market, often measured by sentiment indicators like the Crypto Fear and Greed Index. This signal suggests that market participants are largely selling assets due to panic or uncertainty, driving prices lower. Historically, extreme fear can sometimes precede market reversals, as it may signify a point of capitulation where selling pressure exhausts itself. It represents a strong psychological state among market participants.
Context ∞ Crypto news frequently references “extreme fear signals” when discussing market downturns or potential bottoming scenarios. Reports often interpret these signals as indicators of oversold conditions, suggesting that a market recovery might be imminent, or conversely, that further declines are possible. Understanding the implications of an extreme fear signal helps investors gauge market sentiment and assess potential contrarian investment opportunities.
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