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bitcoin burning money greed fear crypto index
Nexo Logo

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

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin, Cryptocurrency news
Reading Time: 3 mins read
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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.

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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.

Related Reading | This Golden Bull Market Factor Predicts Bitcoin Will Rocket to $14k

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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 fear and greed index

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.

bitcoin btcusd crypto fear and greed index

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.

Related Reading | How Crypto Market Fear And Greed Be Used Profitably As A Trade Trigger

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.

Tags: btcusdBTCUSDTfear and greed indexPrecious Metalssentimentxbtxbtusd
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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