Bitcoin Investors Beware: Extreme Greed Has Returned In Crypto

Keshav Verma

1 year ago

3 mins read

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Data shows that cryptocurrency investors’ sentiment has surged to extreme greed recently, a sign that may not be ideal for Bitcoin.

Bitcoin Fear & Greed Index Is In The Extreme Greed Territory Right Now

The “Fear & Greed Index” is an indicator created by Alternative that keeps track of the average sentiment present among the traders in the Bitcoin and wider cryptocurrency market.

The index represents this sentiment as a number between zero and 100. To calculate the score, the metric takes into account five factors: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends.

When the Fear & Greed Index has a value greater than 54, the investors are greedy. On the other hand, values under 46 imply that the market is fearful currently. The region between these two cutoffs signifies the territory of a neutral mentality.

In addition to these three core sentiments, the index has two special zones: “extreme greed” and “extreme fear.” The former occurs when the metric surpasses 75, while the latter occurs at levels under 25.

Now, here is what the sentiment in the Bitcoin market looks like right now based on the Fear & Greed Index:

Bitcoin Extreme Greed — Looks like the index has a value of 77 | Source: Alternative

As is visible above, the Bitcoin Fear & Greed Index has a value of 77 at the moment, which suggests that investors as a whole feel extreme greed.

The current value means, however, that the market is only just inside this territory. Earlier, the indicator had a lower value, but the latest price surge beyond the $71,000 level has meant that investors have openly jumped on the bull bandwagon.

Below is a chart showing how the sector’s sentiment has changed over the past year.

Bitcoin Fear & Greed Index — The value of the metric seems to have observed an increase in recent days | Source: Alternative

The graph shows that the latest values of the Fear & Greed Index are the highest that the cryptocurrency has witnessed since the first half of April.

Between then and now, the only other time the indicator stepped inside the extreme greed zone was during a stretch in May. During this phase, 76 was the highest the metric could go, which is right at the region’s boundary.

Historically, the price of Bitcoin has tended to go against the majority’s expectations, and the stronger this expectation has become, the more likely it is that such a contrary move will occur.

Since the extreme sentiment zones are where the market turns the most lopsided, reversals are probable. Naturally, extreme fear is where bottoms happen, while extreme greed can lead to tops.

As such, the latest breach into the extreme greed territory could perhaps be bad news for the recovery rally. It should be noted, though, that the current level of the indicator may still not be too high compared to past bull run levels. For example, the rally to the new all-time high price in March saw the indicator peak at 90.

BTC Price

So far in its recovery run, Bitcoin has risen towards the $71,500 level.

Bitcoin Price Chart — The price of the asset appears to have been going up over the last few days | Source: BTCUSD on TradingView

Featured image from Dall-E, Alternative.me, chart from TradingView.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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