Yesterday, Bitcoin broke up by means of resistance at $10,500 and briefly order, rocketed one other $1000 to a excessive of $11,419 on Coinbase Professional. Simply as quick because the cryptocurrency itself climbed, the crypto market worry and greed index spiked to “excessive greed.”
Greed has now reached the very best stage within the crypto market in over a 12 months, hitting a stage that hasn’t been seen since previous Bitcoin tops. May the speedy enhance in excessive greed be a sign that the present pullback is a prelude to a deeper correction? Or will greed flip into irrational exuberance and push Bitcoin and the remainder of the house again in the direction of former highs?
Bitcoin Breakout Rally Leads Market Sentiment In the direction of Irrational Exuberance In One Day
Cryptocurrencies like Bitcoin have spent the final a number of years in a bear market, following the crypto market bubble bursting in 2017. It has solely been just lately that the better crypto market seems to be prepared for a comeback.
The situations are at present excellent. Entrepreneurs, buyers, and analysts alike counsel the restricted provide of those property could make them a fantastic hedge towards the greenback.
Through the multi-year drawdown, provide closely outweighed demand, however that’s since been turning round. And coinciding with that shift in provide and demand dynamics is a greenback that’s slowly shedding its worth.
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The extra money the Fed prints, the weaker the greenback will get. On the identical time, scarce property like cryptocurrencies and treasured metals have been thriving.
It’s helped Bitcoin this week lastly break above $10,500, gold obtain a brand new all-time excessive, and the broader crypto market has been pumping left and proper.
The sharp markup and income generated from a single-day $1,500 rally in Bitcoin ship the crypto market worry and greed index rising simply as sharply because the asset’s worth itself.
Bitcoin BTCUSD Crypto Market Sentiment Worry and Greed Index | Supply: TradingView
Crypto Market Reaches Excessive Greed, Contrarian Indicator Marked Earlier Corrections
Yesterday’s rally induced the crypto market worry and greed index to achieve the very best stage in over a 12 months, and the very best because the June 2019 high at $14,000.
Previous to that, the one different time greed was larger, was simply as Bitcoin started correcting from its all-time excessive at $20,000.
Crypto Market Worry and Greed Index One-Yr Chart | Supply: Different.Me
Worry and greed can usually be utilized by one of the best merchants and buyers as a contrarian indicator. Utilizing such a method would contain shopping for when markets are fearful, and promoting when markets are grasping.
Or because the Oracle of Omaha Warren Buffett would put it, “be fearful when others are grasping, and grasping when others are fearful.”
Based on the crypto market worry and greed index, it could be time to begin being fearful.
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Information reveals that greed reaching such extremes previously has led to substantial corrections and a fall again into worry. Nonetheless, Bitcoin has spent practically three full months buying and selling sideways forward of the breakout, so the rally may solely simply be starting.
If that’s the case, the market is prone to keep grasping and irrational for an prolonged timeframe. Or because the previous has proven, the pullback that began after final night time’s rejection from $11,400 could ship sentiment again towards excessive worry simply as rapidly.