Data shows the Bitcoin market sentiment has returned to the extreme greed territory as BTC has registered its rally beyond the $71,000 level.
Bitcoin Fear & Greed Index Now Points To “Extreme Greed”
The “Fear & Greed Index” is an indicator made by Alternative that tells us about the general sentiment among the investors in the Bitcoin and wider cryptocurrency market.
This index represents the sentiment as a score between zero and hundred. To calculate this value, the indicator takes into account the data of these factors: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends.
When the indicator has a value of 46 or less, it means that the average investor holds a sentiment of fear right now. On the other hand, a value of 54 or more implies the market shares a majority mentality of greed. Naturally, the region in-between these two (47 to 53) corresponds to the neutral sentiment.
Now, here is what the latest value of the Bitcoin Fear & Greed Index looks like:
The index appears to have a value of 81 at the moment | Source: Alternative
As is visible above, the Bitcoin Fear & Greed Index is at 81 right now, meaning that it’s deep into the greed region. In fact, this value is so deep that it’s inside a territory known as “extreme greed.”
Extreme greed occurs when the index hits values higher than 75. Fear also has its own extreme region; this one occupying values under 25. Historically, these two sentiments have proven to be particularly significant for the market.
BTC and other assets in the sector have often tended to move in the opposite direction from what the majority expect. In the territory of the extreme sentiments, this expectation is naturally the strongest, and hence, the probability of a contrary move taking place is also the highest.
Because of this reason, major tops and bottoms in Bitcoin’s price have typically taken shape when the cryptocurrency has been inside the respective extreme zones.
Earlier in the month, the Fear & Greed Index had assumed especially high extreme greed levels, as the asset’s rally towards new all-time highs (ATHs) had occurred.
Two of the major tops in this period, including the current ATH, coincided with peaks in the indicator, implying that the 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 drawdown in the asset, though, the sentiment also cooled off and exited out of the extreme greed territory, as is visible in the above chart. In bullish periods, the sentiment retreading back to the normal greed region can be a positive sign for fresh upward moves to start.
And indeed, this has followed for the cryptocurrency this time as well, as its price has made notable recovery over the past couple of days. With the coin making a return back towards $71,000, the sentiment has also heated up again, hence why the index’s latest value is pointing at extreme greed.
The aforementioned tops from earlier in the month occurred at Fear & 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 probable.
BTC Price
Bitcoin had broken above the $71,000 level earlier in the day, but the digital asset has since registered a bit of a pullback towards $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
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