The Bitcoin constructive sentiment has been rising relatively quickly in the previous couple of months because the market has staged an unbelievable restoration. This noticed the Bitcoin Concern & Greed Index go from deep worry to deep greed and that greed simply continued to develop. Now, the sentiment is on the point of excessive greed, which might be good within the quick time period, however may inherently flip bearish for the worth.
How The Concern & Greed Index Works
The Bitcoin Fear & Greed Index makes use of a quantity scale of 1-100 to identify how traders are feeling towards the crypto market at any given time. This index makes use of various completely different indicators to give you a quantity which ranges from social media posts to market volatility and momentum, amongst others.
The dimensions is then divided into 5 distinct classes relying on how traders are feeling and the quantity that the index is on. 1-25 is taken into account to be excessive worry and is a time when crypto traders are likely to keep away from the market resulting from value drops. Nonetheless, this has typically confirmed to be the very best time to purchase cryptocurrencies.
Subsequent is the 26-46 vary which is called the worry territory. It’s one step forward of extreme fear however can be a time when traders aren’t as cautious regardless of the rampant worry. It’s also time to purchase and precede the following stage, which is impartial.
Impartial is the area between 47-52 and signifies a time when traders are uncertain of this market. Primarily, traders chorus from making any strikes throughout this time, ready for the market to swing both up or down earlier than deciding their subsequent transfer.
One step above that is the greed degree beginning at 53 and ending at 75. Presently, traders are returning to the market and costs are recovering quickly. This typically leads to excessive greed between 76 and 100, the place main choices are being made.
BTC value reclaims $44,000 | Supply: BTCUSD on Tradingview.com
Bitcoin Sentiment Rests At 72
The Fear & Greed Index is at the moment at 72, treacherously near slipping into the acute greed territory which may have huge implications for the worth. Now, wanting again at occasions when the index’s rating has gone this excessive, it paints an image of bullishness adopted by bearishness.
An instance of that is in December 2020 when the index rose into the extreme greed territory. It will proceed to rise as traders trooped into the market, finally topping out at 91. Then what adopted was a crash that despatched traders spiraling. The identical factor occurred between October and November 2021 the place the rating reached excessive greed earlier than crashing.
Given how the Bitcoin value has carried out each time the rating was this excessive, it stands to purpose that extreme greed can typically act as a high sign. So the index going into the 76-100 area can typically signify that it’s time to exit the market.
If this development does repeat, then the Bitcoin value may run additional and mount extra restoration. Nonetheless, it’s headed towards a market crash that might lure bulls who haven’t timed their exit appropriately.
Featured picture from Commerce Santa, chart from Tradingview.com