Bitcoin’s “Extreme Greed” Is Almost Here: Is the Bottom Near?

Data shows Bitcoin sentiment is close to entering the extreme greed zone. Here’s what that could mean for the cryptocurrency’s price.

Bitcoin Fear and Greed Index Continues to Drop Recently

O “Fear and Greed Index” is an indicator developed by Alternative which tells us about the average sentiment that traders of Bitcoin and the cryptocurrency market in general currently share.

The index uses five factors to determine sentiment: volatility, trading volume, social media, market cap dominance, and Google Trends. The metric uses a numerical scale from zero to one hundred to represent sentiment.

All values ​​of the indicator above the 53 mark suggest the presence of greed among investors, while those below 47 imply the dominance of fear. The region between these two limits correlates with a neutral sentiment.

Now, here is what the Bitcoin Fear and Greed Index currently looks like:

The metric value appears to be quite low | Source: Alternative

As you can see above, Bitcoin Fear & Greed currently has a value of 28, which means that the average investor is showing fear. The level of fear should also be quite noticeable, as this current value is pretty deep in the territory.

In fact, the indicator’s latest level is right next to a special region called “extreme fear.” Investors show extreme fear when the index falls below 25. There is also a similar zone on the greed side, which is known as “extreme greed” and occurs above 75.

During the first half of last month, the metric was in or near the latter region, but the recent slowdown in the market has drastically degraded sentiment to the other end of the spectrum.

It appears that the metric’s value has plummeted in recent days | Source: Alternative

Historically, Bitcoin and other cryptocurrencies tend to show movements that are opposite to what the majority expects. The stronger the crowd’s expectations become, the more likely such a counter-movement becomes.

Extreme sentiments are where traders are leaning heavily in one direction. As such, major tops and bottoms in the asset have often formed when the index was in these zones.

For this reason, some traders prefer to buy when investors are showing extreme fear and sell when investors are showing extreme greed. This trading philosophy is popularly called “counter investment.” Warren Buffet’s famous quote sums up the idea: “Be fearful when others are greedy and greedy when others are fearful.”

As the Bitcoin Fear & Greed Index approaches extreme fear territory, it is possible that the cryptocurrency could once again show profitable entry points soon, if the past is anything to go by.

BTC Price

So far, Bitcoin has failed to recover much from the recent dip as its price is still trading around $56,700.

The coin’s price appears to have been moving sideways recently | Source: BTCUSD on TradingView

Featured image of Dall-E, Alternative.me, chart from TradingView.com

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