Bitcoin market sentiment has returned to extreme greed territory as data shows that BTC has recorded its rally beyond the $71,000 level.
The Bitcoin Fear and Greed Index now points to “extreme greed”.
The “Fear and Greed Index” is an indicator created by Alternative that tells us about the general sentiment among investors in Bitcoin and the broader cryptocurrency market.
This index represents emotion as a score between zero and one hundred. To calculate this value, the indicator takes into account data from these factors: volatility, trading volume, social media sentiment, market cap dominance and Google Trends.
When the indicator has a value of 46 or below, it means that the average investor is feeling fearful right now. On the other hand, a value of 54 or higher means that the majority of the market share is greedy. Naturally, the region between these two (47 to 53) corresponds to neutral sentiment.
Now, here’s what the latest value of the Bitcoin Fear and Greed Index looks like:
The index appears to have a value of 81 at the moment | Source: Alternative
As seen above, the Bitcoin Fear & Greed Index is currently at 81, meaning it is deep in greed territory. In fact, this value is so deep that it is in the territory known as “extreme greed”.
Extreme greed occurs when the index hits values above 75. Fear has its own ends; It covers values less than 25. Historically, these two sentiments have proven to be particularly important to markets.
BTC and other assets in this sector tend to go in the opposite direction than most people expect. In the region of extreme emotion, this expectation is naturally strongest and, therefore, the likelihood of opposite movements is also greatest.
For this reason, major tops and bottoms in Bitcoin price take shape when the cryptocurrency is in respective extreme zones.
Earlier in the month, the fear and greed index assumed particularly high extreme greed levels, as assets rallied to new all-time highs (ATHs).
With the current ATH the two major tops of this period have coincided with the tops of the index, implying that bullish sentiment has once again played a role.
Looks like the value of the metric has turned around in the past day | Source: Alternative
With the recent decline in assets, sentiment also cooled and moved out of extremely greedy territory as seen in the chart above. During a bullish period, sentiment returning to normal greed territory can be a positive sign for a new up move to begin.
And indeed, the cryptocurrency has followed suit this time as well, as its price has improved significantly over the past few days. With the coin returning to $71,000, sentiment has also re-heated, hence the index’s latest value showing extreme greed.
The aforementioned tops earlier in the month came at fear and greed index values of 90 and 88 respectively, suggesting that the current extreme greed value of 81 may not be too likely to lead to another peak.
BTC price
Bitcoin left the $71,000 level earlier in the day, but the digital asset has recorded a slight 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 courtesy of Shutterstock.com, Alternative.me, TradingView.com
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