The Fear and Greed Index on bitcoin is currently at 86 confining it in the ‘Extreme Greed’ range after a massive surge in the price of the cryptocurrency. Extreme Greed could be a sign that a drop is imminent because investors collecting too much profit could lead to an oversupply and price retreat.
Being a highly emotional market, investors tend to get greedy when the market is rising which results in fear of missing out (FOMO). People also often sell their coins in the irrational reaction to seeing red numbers. In the Fear and Greed index, Extreme fear can be a sign that investors are too worried which could also present a buying opportunity. However, when investors are getting too greedy, that means the market is due for a correction.
But researchers at Luno said there could be an upside to the too much greed sentiment.
“While the sentiment right now is around the highest we have seen according to this index, we should keep in mind that it didn’t exist during the 2017 bull run, and it’s hard to tell how it would have looked then,” the researchers said. “But as we always highlight, the index doesn’t stay this high very often, and a pullback would not be surprising.”
A price pullback may have already begun – or not – on Thursday, as the price of bitcoin was trading at $17,855 on the Coinmarketcap index after a record run earlier in the week. The price rose to about $18,400 as of Wednesday. BusinessDay reported that at more than $18,000 bitcoin has already surpassed the all-time high in countries like Nigeria, Angola, Venezuela, and Brazil where there is a high inflation rate.
The amount of active BTC addresses has been growing strongly throughout the bull run this fall, and the 7-day average is now at its highest since January 2017. Bitcoin has only seen five days with a higher number of daily active addresses, and they all occurred during the peak of the bull run in 2017.
Researchers at Luno notes that while the bull run of 2017 saw a huge spike in the activity over a short time period, this year has been different. The number of active addresses has grown more organically in 2020, without a surging and dramatic spike as witnessed in late 2017. This, they said, maybe an indication that bitcoin is seeing increased usage and adoption.
