Extreme greed has returned to the cryptocurrency market, with bitcoin adding roughly $20,000 since its July drop and reaching $48,000 earlier today.
Following recent developments in the cryptocurrency markets, in which BTC’s price skyrocketed by double-digit percentages in a matter of weeks, the general sentiment has shifted significantly. For the first time in nearly three months, the popular Bitcoin fear and greed index has entered “extreme greed” territory.
Extreme Greed Is Returning
The Bitcoin fear and greed index gauges public sentiment toward the primary cryptocurrency by analyzing a variety of factors. Surveys, volatility, volume, social media comments, and other factors are among them.
It produces scores ranging from 0 (extreme fear) to 100 (extreme greed). The price of the asset is typically what drives the most changes in the metric. As a result, for several weeks after bitcoin began its USD decline in mid-May, the index was deep in a state of extreme fear, with a low of 10.
However, things began to change after BTC recovered from its most recent sub-$30,000 foray. For a while, the index was in a state of greed at and above 50. However, at 76, it has relapsed into extreme greed.
This coincided with bitcoin’s most recent surge, in which it gained several thousand dollars in hours and surpassed $48,000 for the first time since – yes, mid-May.
Similarly, the Ethereum fear and greed index – which works similarly but tracks ETH rather than BTC – is very close to such extreme greed. The value of the second-largest cryptocurrency has nearly doubled in less than a month.
What Does the Block-Chain Say About Bitcoin’s Price?
Because the price appears to be the most linked to the fear and greed index, it’s worth looking at some of the metrics that could provide an overall picture of what’s to come. Aside from the technical aspects, some on-chain data suggest that large investors should hold off on selling for the time being.
According to Santiment, the supply of BTC on digital asset exchanges has decreased “substantially” in the last two weeks. This was deemed a “encouraging sign” for the bulls by the analytics firm.
“As traders move more funds to cold wallets, this hodl mentality reduces the risk of future large selloffs.”
BTC inflows to exchanges, which have recently dried up, provide additional evidence that investors are not in a selling mood. As a result, despite bitcoin’s 60 percent surge in three weeks, Santiment believes there is a “sign that BTC will approach ATH levels again,” as exchange inflows remain dormant.