Data shows that Bitcoin market sentiment has returned to extreme greed territory as BTC has seen its rally past the $71,000 level.
Bitcoin Fear and Greed Index Now Points to “Extreme Greed”
O “Fear and Greed Index” is an indicator made by Alternative this tells us about the general sentiment among investors in Bitcoin and the broader cryptocurrency market.
This index represents sentiment as a score between zero and one hundred. To calculate this value, the indicator takes into account data from these factors: volatility, trading volume, sentiment on social networks, market value dominance and Google Trends.
When the indicator has a value equal to or less than 46, it means that the average investor maintains a feeling of fear at this moment. On the other hand, a value of 54 or more implies that the market shares a majority greed mentality. Naturally, the region between these two (47 to 53) corresponds to neutral sentiment.
Now, here is what the latest Bitcoin Fear & Greed Index value looks like:
The index appears to have a value of 81 at the moment | Source: Alternative
As can be seen above, the Bitcoin Fear & Greed Index is at 81 right now, which means it is deep in the greed region. In fact, this value is so deep that it lies within a territory known as “extreme greed.”
Extreme greed occurs when the index reaches values above 75. Fear also has its extreme region; this occupying values below 25. Historically, these two feelings have proven to be particularly significant for the market.
BTC and other assets in the sector often tend to move in the opposite direction to what most expect. In the territory of extreme feelings, this expectation is naturally the strongest and, therefore, the probability of an opposite movement occurring is also the highest.
For this reason, major Bitcoin price tops and bottoms typically took shape when the cryptocurrency was within the respective extreme zones.
At the beginning of the month, the Fear and Greed Index assumed especially high extreme greed levels as the asset recovery new historical records (ATHs) occurred.
Two of the major tops of this period, including the current ATH, coincided with peaks in the indicator, implying that overheated sentiment may have once again played a role.
Looks like the value of the metric has turned around in the past day | Source: Alternative
With the recent asset drawdown, however, sentiment has also cooled and moved out of extreme greed territory, as is visible in the chart above. In bullish periods, sentiment returning to the normal greed region can be a positive sign for the start of new upward movements.
And in fact, this time it also happened with cryptocurrency, as its price has made a notable recovery in recent days. With the currency returning to $71,000, sentiment has also heated up again, which is why the latest index value points to extreme greed.
The tops mentioned earlier in the month occurred with Fear and Greed Index values of 90 and 88 respectively, suggesting that the current extreme greed value of 81 may not be too high for another peak to be likely.
BTC Price
Bitcoin broke above the $71,000 level earlier in the day, but the digital asset has since recorded a small pullback to $70,700.
The price of the coin seems to have sharply risen over the past two days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Alternative.me, chart from TradingView.com
Disclaimer: The article is provided for educational purposes only. It does not represent NewsBTC’s opinion on buying, selling or holding any investments and, naturally, investing carries risks. We advise that you conduct your own research before making any investment decisions. Use the information provided on this website at your own risk.
