Here’s What Surging Crypto Market “Greed” Could Say About Today’s Drop

Tony "The Bull" Severino

Last Updated: July 28, 2020 8:00 pm

3 mins read

bitcoin burning money greed fear crypto index

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Yesterday, Bitcoin broke up through resistance at $10,500 and in short order, rocketed another $1000 to a high of $11,419 on Coinbase Pro. Just as fast as the cryptocurrency itself climbed, the crypto market fear and greed index spiked to “extreme greed.”

Greed has now reached the highest level in the crypto market in over a year, hitting a level that hasn’t been seen since past Bitcoin tops. Could the rapid increase in extreme greed be a signal that the current pullback is a prelude to a deeper correction? Or will greed turn into irrational exuberance and push Bitcoin and the rest of the space back towards former highs?

Bitcoin Breakout Rally Leads Market Sentiment Towards Irrational Exuberance In One Day

Cryptocurrencies like Bitcoin have spent the last several years in a bear market, following the crypto market bubble bursting in 2017. It has only been recently that the greater crypto market appears to be ready for a comeback.

The conditions are currently perfect. Entrepreneurs, investors, and analysts alike suggest the limited supply of these assets can make them a great hedge against the dollar.

During the multi-year drawdown, supply heavily outweighed demand, but that’s since been turning around. And coinciding with that shift in supply and demand dynamics is a dollar that’s slowly losing its value.

The more money the Fed prints, the weaker the dollar gets. At the same time, scarce assets like cryptocurrencies and precious metals have been thriving.

It’s helped Bitcoin this week finally break above $10,500, gold achieve a new all-time high, and the broader crypto market has been pumping left and right.

The sharp markup and profits generated from a single-day $1,500 rally in Bitcoin send the crypto market fear and greed index rising just as sharply as the asset’s price itself.

Bitcoin BTCUSD Crypto Market Sentiment Fear and Greed Index | Source: TradingView

Crypto Market Reaches Extreme Greed, Contrarian Indicator Marked Previous Corrections

Yesterday’s rally caused the crypto market fear and greed index to reach the highest level in over a year, and the highest since the June 2019 top at $14,000.

Prior to that, the only other time greed was higher, was just as Bitcoin began correcting from its all-time high at $20,000.

Crypto Market Fear and Greed Index One-Year Chart | Source: Alternative.Me

Fear and greed can often be used by the best traders and investors as a contrarian indicator. Using such a strategy would involve buying when markets are fearful, and selling when markets are greedy.

Or as the Oracle of Omaha Warren Buffett would put it, “be fearful when others are greedy, and greedy when others are fearful.”

According to the crypto market fear and greed index, it may be time to start being fearful.

Data shows that greed reaching such extremes in the past has led to substantial corrections and a fall back into fear. However, Bitcoin has spent nearly three full months trading sideways ahead of the breakout, so the rally could only just be beginning.

If that’s the case, the market is likely to stay greedy and irrational for an extended timeframe. Or as the past has shown, the pullback that started after last night’s rejection from $11,400 may send sentiment back toward extreme fear just as quickly.

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

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In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

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Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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