Bitcoin Sentiment Cools Down From Extreme Greed: Can Rally Restart Now?

Keshav Verma

7 months ago

2 mins read

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On-chain data shows the Bitcoin Fear & Greed Index has cooled down from extreme greed, a sign that may be positive for BTC’s price.

Bitcoin Fear & Greed Index Is Pointing At ‘Greed’ Again

The “Fear & Greed Index” refers to an indicator created by Alternative that tells us about the average sentiment among investors in the Bitcoin and wider cryptocurrency markets.

This metric uses a scale from zero to a hundred to represent its value. All values greater than 53 imply the presence of greed among the traders, while those under 47 suggest fear in the market. The index reflects a net-neutral mentality in the region between these two cutoffs.

Besides these three main sentiments, the indicator can also signal two special sentiments: extreme fear and extreme greed. The former occupies the region below 25 and the latter above 75.

Now, here is what the Bitcoin Fear & Greed Index is saying regarding the current market sentiment:

As is visible above, the index has a value of 75, which means that the investors share a sentiment of greed right now. This mentality is also particularly strong, as the indicator’s value is right on the boundary of the extreme greed zone.

Historically, the extreme mentalities have proven to be quite significant for Bitcoin and other digital assets, as it’s when the index is in these zones, the prices tend to hit major points of reversal.

However, the relationship between the two is inverse, meaning bottoms are likely to happen when the market is the most fearful, while tops occur in times of immense greed.

Followers of a trading technique called contrarian investing leverage this fact to make their trades; they buy in extreme fear and sell during extreme greed. Warren Buffet’s famous quote also sums up this idea, “be fearful when others are greedy, and greedy when others are fearful.”

While the current value of the index is high, it was much higher during the last few days, as the below chart shows.

Bitcoin Greed — The value of the indicator appears to have declined in recent days | Source: Alternative

The Bitcoin Fear & Greed Index was firmly inside the extreme greed territory as the rally in the asset took place, with a peak of 94 occurring alongside the cryptocurrency’s top above the $99,000 level.

Thus, it appears Bitcoin has once again moved contrary to the crowd’s expectations, as its price has registered a notable drawdown since this extreme greed high.

Ideally, the sentiment would cool off into the fear region for a reversal in the asset. Still, during bull runs, where demand is extraordinarily high, a refresh into the neutral or normal greed zone is often enough for the rally to regain steam.

With the Fear & Greed Index inside the greed region again, it remains to be seen whether Bitcoin will be able to find a rebound.

BTC Price

When writing, Bitcoin is trading at around $93,800, up over 1% in the last 24 hours.

Bitcoin Price Chart — The trend in the BTC price over the last five days | Source: BTCUSDT 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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