Does Bitcoin Sentiment Drive Price — Or Follow It

Bitcoin has trended upward in early 2026, showing signs of recovery in the first half of the year. This marks a sharp reversal from the last quarter of 2025, when BTC was down over 23%.

The leading cryptocurrency had three consecutive red months, recording a performance of -3.69%, -17.67%, and -2.97% in October, November, and December of 2025, according to data from CoinGlass.

Bitcoin’s 1Q26 performance has started green as it trades near $96,500, down roughly 23.5% from its all-time high (ATH) of $126,000, hit on October 6th, 2025.

With this reversal, market sentiment has significantly improved. Investor sentiments turned to “greed” for the first time since October, marking a sharp pivot from the “extreme fear” dominating the last few months.

This shift is reflected in the Crypto Fear & Greed Index, widely used by market participants to gauge market sentiment.

Crypto traders and investors closely track sentiment indicators to understand how other participants are feeling, as emotions often drive price movements. The index often reveals the market’s collective psychology before trends fully develop, and traders move their positions accordingly.

The index, which ranges from 1 to 100, recently rose to 61. Only days prior, the index stood at 48, a neutral level, and shortly before that, it was at 26, indicating market fear.

In November and December, the reading went as low as 10, indicating “extreme fear” among crypto market participants.

During this time, spot Bitcoin ETFs recorded massive outflows almost daily, and Bitcoin OG holders used the ATH as a prime selling opportunity, putting downward pressure on prices. Sentiments took a particularly big hit on October 11 when about $19 billion was liquidated from crypto markets in a single day, causing a massive drawdown in altcoin prices and triggering a prolonged risk-off stretch.

In the weeks following the event, the index value dropped significantly, signaling caution among traders.

Currently, sentiments have turned positive. Historically, extreme fear tends to appear near market bottoms, while prolonged greed tends to occur closer to market peaks. Greed is also seen during recovery phases after the market has sustained months of caution and risk aversion.

As the index rises to 61, it points to improving risk appetite among participants, highlighting how quickly the mood has turned as Bitcoin enjoys a green run and returns to the level seen before the October correction.

Bitcoin’s price rose to a two-month high of $97,704 recently, up from $90K a week ago. With Bitcoin’s recovery, the total crypto market cap has risen to $3.35 trillion, helping stabilize market confidence.

As liquidity improves, macro uncertainty softens, and Bitcoin price holds key support levels, the return of greed has investors expecting further upside.