Crash harbinger? Bitcoin’s „fear and greed index“ has never been on „extreme greed“ for this long
- The Bitcoin Anxiety and Greed Index has been set at „Extreme Greed“ for over a month.
- The recent price rally and bullish developments have strengthened investor confidence.
- Such an exuberance in the market could point to an impending correction.
The Bitcoin „Fear and Greed Index“ remains at „Extreme Greed“. The instrument used to analyse Bitcoin Machine market sentiment has not fallen below its peak since the beginning of November.
The fear and greed index now lasts over a whole month and has never spent so many days at such a high level. According to the index’s creators, such overwhelming investor confidence could indicate an impending decline in Bitcoin prices.
Investors still greedy, as Bitcoin is close to its all-time high
The price of Bitcoin has increased by about 80% in the last two months. The leading crypto currency was traded at around $10,600 on 5 October. Today, a single Bitcoin costs over $19,130.
The dramatic rise in price, which caused BTC to surpass its all-time high on some exchanges, has also led to a return of immense optimism in the crypto-currency industry. This is illustrated by the crypto currency market sentiment analysis tool, the fear and greed index.
The Fear and Greed Index draws its data from market volatility, dynamics and volume, social media exposure, BTC dominance and surveys. It combines these sources to give a score of 100, which corresponds to a general descriptor of either extreme fear, anxiety, neutrality, greed or extreme greed.
Since 5 November, the metric has been „Extreme greed“. This is by far the longest period of such market optimism in its history.
Even the slump below $16,700 at the end of last month has not shaken investor confidence in the market. The fear and greed index remained above 86 out of 100 points during the brief downtrend. It promptly climbed back up to 93. Anything above 80 stands for „extreme greed“.
Is the market too confident in the short term?
The recent rise in prices and the resulting market confidence seems to be due to large-scale purchases by a number of companies. These include MicroStrategy, which has just added another $50 million worth of BTC to its own colossal inventory, PayPal and Square, and Grayscale.
The overwhelming bullish sentiment is also contributed to by the increasing number of valuations from the world of traditional finance and investment. Financial institutions such as Citibank, Deutsche Bank and JP Morgan have all expressed optimism about the future of BTC. Even legendary investment figures like Paul Tudor Jones and Stan Druckenmiller have expressed optimism.
Although the Bitcoin industry has much to be confident about, the aforementioned index itself suggests that BTC may be overbought – at least in the short term. The website where the tool is hosted suggests that this overwhelming greed could be a sign that the market is ready for a correction.
Those expecting a correction base their opinion on a maxim of the famous investor, billionaire and BTC denier Warren Buffett. Buffett coined the popular maxim: „Be fearful when others are greedy and greedy when others are fearful“.
Unfortunately, the fear and greed index has only existed since February 2018, so we cannot compare the latest phase of „extreme greed“ with the last time BTC approached $20,000 in December 2017.
However, most analysts agree on one point. The conditions for the current price rise are completely different from the earlier all-time high that preceded the prolonged bear market of 2018.