The crypto market’s Fear and Greed Index, a gauge of investor sentiment, entered neutral territory for the first time since January.

Cointelegraph, a blockchain media outlet, reported on May 5 that the index hit 50, ending 108 days of negative sentiment.

The Fear and Greed Index measures market sentiment by reflecting volatility, momentum, trading volume and social media signals. Readings of 25 or below are classified as "extreme fear" and 26 to 49 as fear. A reading of 50 means the market has moved out of fear and into neutral territory.

The improvement in sentiment came alongside a recovery in total crypto market value. The total market capitalisation of cryptocurrencies has risen 5.45 percent so far in May and is up 16.51 percent since March, expanding to $2.66 trillion from $2.28 trillion. The broader recovery in funds across the market has led to the rebound in sentiment.

Bitcoin is also trying to establish itself around $81,000 in this trend. Analyst Darkfost saw sentiment gradually turning more constructive as bitcoin tests higher levels. Darkfost also pointed to a separate bitcoin composite sentiment index moving into greed territory. That suggests investors are leaning toward holding bitcoin rather than rushing to sell.

Even so, it is difficult to conclude that the uptrend will immediately strengthen. A similar shift in sentiment appeared in January, but momentum later weakened. Darkfost viewed the current level as a potential inflection point and mentioned that the next move depends on investor behaviour.

Exchange liquidity indicators remain a short-term risk factor. On Binance, net stablecoin outflows since April 25 have totalled $11.8 billion. The indicator shows the amount of stablecoins moving in and out of an exchange and is typically used as a yardstick for the strength of sidelined funds that can be deployed for spot buying.

Net inflows are interpreted as a signal that funds are entering an exchange and that accumulation could increase. By contrast, net outflows mean funds are leaving exchanges, which could reduce spot-buying liquidity. Recently, outflows of more than $1.5 billion a day continued over several trading sessions.

Market analyst Crazyblock assessed that stablecoin reserves built up on Binance in early April supported bitcoin’s rise. He said steady inflows appeared as bitcoin climbed from $74,000 to $78,000, but the trend has now reversed.

As a result, the market is receiving mixed signals at the same time. Investor sentiment and market capitalisation are recovering, but sidelined funds on exchanges are shrinking. Crazyblock said the current outflow trend is thinning the pool of funds that can be deployed in the short term, which could somewhat weigh on bullish momentum in bitcoin and other cryptocurrencies.

Ultimately, the key question is whether bitcoin can stabilise above $80,000 while restoring exchange liquidity. The fact that sentiment indicators have moved out of fear is positive, but the possibility remains that expectations for $100,000 could weaken again if actual buying power does not support the move.

We are returning to a more positive market sentiment as BTC attempts to establish itself above $80,000. — This index, which incorporates the Fear & Greed Index among other components, does not function in the same way. Its scale ranges from +100 to -100, moving from… pic.twitter.com/PWIA5lwihS