The data shows that bitcoin market sentiment has moved away from extreme greed territory, something that may pave the way for the rally to continue.
bitcoin Fear and Greed Index Currently Pointing to 'Greed'
The “Fear and Greed Index” is an indicator created by crypto/fear-and-greed-index/” target=”_blank” rel=”noopener nofollow”>Alternative which measures the general sentiment present among traders in the bitcoin and cryptocurrency market in general.
The index takes these five factors into account to calculate this average sentiment: volatility, trading volume, social media sentiment, market cap dominance, and Google Trends.
To represent sentiment, the indicator uses a numerical scale that goes from zero to one hundred. Values on this scale below 47 correspond to the presence of fear among investors, while values above 53 suggest greed in the market.
The region between 47 and 53 naturally means the “neutral feeling” region. In addition to these three core territories, there are also two extreme feelings called extreme fear and extreme greed, which occur at the extremes of the fear and greed ranges (below 25 and above 75, respectively).
Now, here's what the value of the bitcoin Fear & Greed Index looks like right now, to see which of these territories the current market is in:
<img decoding="async" class="alignnone size-medium wp-image-283717 aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-Traders-Cool-Down-on-Extreme-Greed-Sign-of-Bottom.png" alt="bitcoin greed” width=”640″ height=”281″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/02/meter.png?w=756 756w, https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-Traders-Cool-Down-on-Extreme-Greed-Sign-of-Bottom.png 640w, https://bitcoinist.com/wp-content/uploads/2024/02/meter.png?w=750 750w” sizes=”(max-width: 640px) 100vw, 640px” data-recalc-dims=”1″/>
The value of the indicator appears to be 72 at the moment | Source: crypto/fear-and-greed-index/" target="_blank" rel="noopener nofollow">Alternative
As can be seen above, the bitcoin Fear & Greed Index is currently worth 72, suggesting that sentiment is deep into the region of greed, but still outside of extreme greed territory.
However, this is a recent change, as just before that the sentiment had reached the region of extreme greed. The graph below shows how the value of the metric has fluctuated over the past year.
<img loading="lazy" decoding="async" class="alignnone wp-image-283722 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/1708967560_879_Bitcoin-Traders-Cool-Down-on-Extreme-Greed-Sign-of-Bottom.png" alt="bitcoin Fear and Greed Index” width=”980″ height=”464″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/02/chart_0ffaf6.png?w=1117 1117w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_0ffaf6.png?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_0ffaf6.png?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_0ffaf6.png?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_0ffaf6.png?w=750 750w” sizes=”(max-width: 980px) 100vw, 980px” data-recalc-dims=”1″/>
Looks like the value of the metric has been quite high in recent days | Source: crypto/fear-and-greed-index/" target="_blank" rel="noopener nofollow">Alternative
It is clear from the graph that the fear and greed index has recently been at its highest point in the past year. This is in stark contrast to sentiment at the end of January, when the index was neutral.
This sharp rise in market sentiment came as the cryptocurrency went through its rally towards current price levels of over $51,000. However, historically, outbreaks of extreme greed have actually been a bearish predictor for the asset.
This is because bitcoin has generally tended to show movements contrary to what most expected. The probability of a contrary move increases as this expectation strengthens. Naturally, this probability is stronger in regions of extreme feelings.
Followers of a trading philosophy called “contrarian investing” exploit this pattern in the market to time their buying and selling moves. As Warren Buffet famously said, “Be fearful when others are greedy and greedy when others are fearful.”
bitcoin's high at the time of the ETF's spot approval, as well as recent local highs above $52,000 and $53,000, coincided with increases in extreme greed.
The fact that the bitcoin Fear & Greed Index has recently turned lower from extreme greed means that while the danger of a cap is not completely over, its likelihood has certainly been reduced. This could allow for a possible continuation of the rally from current price levels.
btc Price
bitcoin has been consolidating recently as the market went through euphoria. Currently, the coin is trading around $51,100.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-Traders-Cool-Down-on-Extreme-Greed-Sign-of-Bottom" alt="bitcoin price chart” width=”1534″ height=”854″/>
The price of the coin has been stuck in sideways movement recently | Source: BTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, Alternative.me, TradingView.com chart
