Data shows that the sentiment surrounding Bitcoin has reached extreme levels of greed, surpassing even the sentiment during the price all-time high in November 2021.
The Fear & Greed Index Indicates Extreme Greed
The Fear & Greed Index is an indicator created by Alternative that tracks the general sentiment among investors in the Bitcoin and wider cryptocurrency market.
The index calculates a score ranging from zero to one hundred based on five factors: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends.
A score below 47 indicates fear, while a score above 53 suggests greed. The region between these two scores represents a neutral sentiment. Additionally, there are two extreme sentiments: extreme fear (25 and below) and extreme greed (75 and above).
Currently, the Bitcoin Fear & Greed Index is at a value of 90, indicating that investors are experiencing extreme greed. This is a significant increase from the previous day’s sentiment when the index was around 82.
This surge in greed can be attributed to Bitcoin’s recent rally towards a new all-time high.
Historical Comparison
Comparing the current level of the Fear & Greed Index to historical data reveals that it has surpassed the level seen during the November 2021 all-time high. The graph illustrates how the index has fluctuated since its inception in 2018.
Aside from late 2020 and early 2021, when the metric reached similar levels, there was only one other instance where it exceeded its current value: during the peak of the mid-2019 rally.
Bitcoin has historically moved against majority expectations, with instances like the 2019 rally and November 2021 demonstrating this pattern. Therefore, these extreme levels of greed could indicate a potential top forming in the price.
However, it is important to note that a top does not necessarily have to occur immediately. During the first half of the 2021 bull run, the metric remained at even higher levels for an extended period without compromising the rally.
Bitcoin Price
Bitcoin came close to reaching a new all-time high but has since retraced to around $66,700.
Hot Take: Potential Risk Ahead
The extreme greed sentiment reflected in the Fear & Greed Index suggests caution may be warranted. While Bitcoin’s price has been on an upward trajectory, it’s important to remember that market sentiment can change rapidly. Here are some key takeaways:
- The Fear & Greed Index currently indicates extreme greed among investors in Bitcoin.
- This level of greed has surpassed previous highs, indicating a potential top formation.
- Historically, Bitcoin has moved against majority expectations, making a contrary move more likely as sentiment leans towards one side.
- A top doesn’t necessarily mean an immediate reversal; the rally can continue at high levels for some time before a correction occurs.
- Bitcoin’s price recently reached near its all-time high but has since retraced slightly.
As always, it’s crucial to approach cryptocurrency investments with caution and perform thorough research before making any decisions. Market sentiment can be fickle, and understanding the underlying factors driving price movements is essential for successful trading.
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