Data shows that Bitcoin market sentiment has returned to the extreme greed territory as BTC has rallied past the $71,000 level.
The Bitcoin Fear & Greed Index now indicates “extreme greed”.
The Fear & Greed Index is an indicator created by Alternative that gives us insight into the general sentiment among investors in the Bitcoin and broader cryptocurrency market.
This index represents sentiment as a value between zero and one hundred. To calculate this value, the indicator takes into account the data from these factors: volatility, trading volume, social media sentiment, market capitalization dominance and Google Trends.
If the indicator has a value of 46 or less, it means that the average investor is currently harboring a sense of fear. On the other hand, a value of 54 or higher suggests that the market shares a majority mentality of greed. The range in between (47 to 53) naturally corresponds to the neutral mood.
This is what the current value of the Bitcoin Fear & Greed Index looks like:
As can be seen above, the Bitcoin Fear & Greed Index is currently at 81, meaning it is deep in greed territory. In fact, this value is so profound that it is in a range known as “extreme greed.”
Extreme greed occurs when the index reaches values above 75. Fear also has its own extremes; This is at values below 25. Historically, these two sentiments have proven to be particularly important for the market.
BTC and other assets in this sector often tended to move in the opposite direction than the majority expected. In the area of extreme feelings, this expectation is naturally strongest and therefore the probability of a countermovement is highest.
For this reason, major highs and lows in the Bitcoin price typically occur when the cryptocurrency is within the respective extreme zones.
At the start of the month, the Fear & Greed Index was coming off particularly high extreme greed levels as the asset rallied toward new all-time highs (ATHs).
Two of the key highs during this period, including the current ATH, coincided with highs on the indicator, suggesting that overheated sentiment may have once again played a role.
NewsBTC
However, with the asset's recent decline, sentiment also cooled and moved out of the extreme greed zone, as can be seen in the chart above. During bullish phases, the return of sentiment to the normal greed range can be a positive sign of the start of new bullish movements.
And this actually applies to the cryptocurrency this time too, as its price has recovered significantly in the last few days. As the coin returned towards $71,000, sentiment has also heated up again, which is why the index's recent value suggests extreme greed.
The aforementioned highs from earlier in the month were reached 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 high to be likely.
BTC price
Earlier in the day, Bitcoin broke through $71,000, but since then the digital asset has seen a slight decline towards $70,700.
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