After the recent rally in cryptocurrencies, there was a noticeable price increase in Bitcoin and several altcoins. During this process, the level of greed in cryptocurrency returned to the highest levels last seen in the 2021 bull. Despite being earlier than expected, investors and traders harbor a strong belief that the bull market has started and they already have high expectations before 2024.
What is the Fear and Greed Index?
The Fear and Greed Index provides information about the emotional state of the general sentiment in a particular market, based on data obtained with the help of technical indicators. Essentially, fear rises under weak momentum with decline indicators and high selling pressure. Meanwhile, greed emerges during a strong momentum when demand increases.
However, situations where excessive fear is observed generally show parallelism with oversold situations, while excessive greed can usually indicate overbought situations. Both situations mentioned can be a trigger for a reversal of a trend and sentiment.
Return to 2021 in Crypto
Specifically, according to the index published by Alternative, crypto ‘Greed’ reached its highest level in recent years with 74 on November 30th. The index, which maintained its strength in this region, was in the greed zone with 73 as of December 9th, when this article was written.
Interestingly, this level of greed had previously been reached during the bull market of 2021. Even earlier, the crypto fear and greed index had consistently visited these levels in the early periods of August 2020.
As seen in the graph above, the index has a structure containing ups and downs. Independent peaks do not seem directly related to the bull market. In addition, when Greed (or Fear) is consistently in a certain area, the correlation can attract attention depending on a more reliable indicator.
Considering what happened in 2020 and 2021, it may be possible for fear in crypto to dominate again before the levels of extreme greed that may occur later.
All things considered, the highest level seen for a long time reflects the feelings of many cryptocurrency followers at this visited level.
Finally, if the cryptocurrency market can maintain the continuity of capital inflows and maintain its strong momentum, cryptocurrency prices may continue to rise in the coming days. Afterwards, a certain amount of pullback in the market could be one of the possible situations if greed rises too much and too quickly.
