Bitcoin traders have been described as ‘greedy’ by the Bitcoin Fear and Greed Index, which hit a 16-month high of 64 in March 2023. This shift in sentiment comes on the back of the fast-spreading optimism amongst traders about Bitcoin’s prospects, which have resulted in an impressive performance in recent trading days.
The Fear and Greed Index is a critical crypto sentiment indicator that investors and traders watch closely to assess the cryptocurrency market’s overall mood. In contrast to conventional asset classes, Bitcoin can be subject to hype, hence its popularity.
The Bitcoin Fear and Greed Index captures how the mood of traders varies from extreme fear to extreme greed—the two different emotions that investors and traders experience while making strategic market moves.
When market conditions are favourable and traders expect Bitcoin to do well, there is often a sense of Fear Of Missing Out (FOMO). Conversely, when the markets are experiencing a depressed condition, characterized by tanking prices, the general mood often slides into Fear, Uncertainty, and Doubt (FUD), resulting in a sell-off that can force prices lower.
Bitcoin’s bullish run began in late March 2023, and as of the time of writing, BTC has crossed the $27,000 mark, surging by over 35% in under a week. This unprecedented cryptocurrency boom comes on the heels of a series of fundamental events that shook traditional finance markets, causing capital to funnel into censorship-resistant and trustless assets, mainly Bitcoin and Ethereum (ETH).
Following news of a bank run on Silicon Valley Bank (SVB) and the closure of Signature Bank, fomo sentiment quickly gripped crypto traders, sparking a rapid rise in the price of bitcoin from lows of $19,700 to over $27,000. The fear of a market-wide collapse and the US Federal Reserve providing a safety net for struggling banks caused an increase in speculation that bank easing could fuel Bitcoin’s bullish run.
The preview of Bitcoin’s continued rally is expected to drive the Fear and Greed Index higher. During the last bull cycle in November 2021, when Bitcoin peaked at over $69,000, the Fear and Greed index stood at 72. And even with the Bitcoin trading at over half of its 2021 high, the reading may surpass 72.
The daily charts indicate that Bitcoin has already bottomed and is trading above the highs of February 2023 and August 2023, rising by 74% from its November 2022 low. This shows that Bitcoin is maintaining its bullish run, leading to the index reading of 64, indicating that traders are feeling bullish about Bitcoin’s prospects.
In conclusion, despite the uncertainty surrounding the cryptocurrency market, Bitcoin appears to remain unaffected, leading to bullish sentiments among traders, as shown by the Fear and Greed Index. The index suggests a positive sentiment towards Bitcoin’s future, backed by fundamental events that have driven capital from traditional markets to crypto markets. However, traders and investors should bear in mind that this mood can change as quickly as it emerged, and market volatility is still a major risk factor in cryptocurrency trading.
