Data shows that Bitcoin investors have turned greedy again following BTC’s surge to $64,000. Here’s what it could mean.
Bitcoin Fear and Greed Index now pointing to ‘Greed’
The “Fear and Greed Index” is an indicator created by Option Which tells us a lot about the current sentiment among investors of Bitcoin and other major cryptocurrencies.
This metric uses data from five factors to determine net market sentiment: volatility, trading volume, social media sentiment, market capitalization dominance and Google Trends.
The index uses a scale from zero to hundred to reflect this sentiment. All values above 53 points indicate the presence of greed among investors, while values below 47 indicate fear in the market. Naturally, values between these two cutoffs indicate a net-neutral mindset.
Now, here’s what the Bitcoin Fear and Greed Index looks like at the moment:
The value of the metric appears to be 55 at the moment | Source: Alternative
As can be seen above, the indicator has a value of 55, which means that investors are currently sharing a greedy sentiment. This greedy mindset is a new change for the market compared to the recent trend.
The chart below shows how the value of the index has changed over the past year.
Looks like the value of the indicator has shot up in recent days | Source: Alternative
The graph shows that the value of the Bitcoin Fear & Greed Index was relatively low last week. Specifically, the indicator was deep inside the fear zone and very close to a special zone called extreme fear.
Extreme fear occurs when the index registers a value of 25 or less. The metric has made several trips into this zone over the past month, with perhaps the most notable example being the lows that occurred on August 5, coinciding with the price bottom.
Historically, Bitcoin has seen several cases of such a pattern, where a drop into extreme fear territory has pushed the cryptocurrency’s price to some lower levels.
A similar but opposite pattern is also observed for the extreme greed zone, which starts at 75 on the Fear and Greed Index. The all-time high (ATH) of the price at the beginning of the year was also created when the sentiment moved into this zone.
Thus, it appears that Bitcoin tends to move in the opposite direction of what the general public expects. Extreme sentiments reflect the periods when this expectation is strongest, so it makes sense that reversals would be most likely to occur during them.
Recently, investors have started to show bullishness again as the trend has shifted from fear to greed. Since this enthusiasm is mild at the moment, it should not have a negative impact on Bitcoin.
However, the index is one to keep an eye on in the coming days, as any bounce back towards extreme greed could serve as a warning that things are getting too heated for the asset.
BTC Price
Bitcoin shot up to $65,000 yesterday, but the asset has since fallen to $63,600.
The price of the coin appears to have gone stale after its recent rally | Source: BTCUSD on TradingView
Featured image Dall-E from Alternative.net, Chart from TradingView.com
