Since 2015, Bitcoin’s historical price movements have shown fascinating patterns when the Fear and Greed Index (FGI) exceeds the critical threshold of 90. This extreme sense of greed consistently coincides with significant price events, often marking either an all-time high or a relative peak. However, while such periods can be exciting, they also act as precursors to sharp market corrections, providing valuable lessons for traders and investors.
1. Key Historical Milestones When FGI Exceeded 90
December 2017: Bitcoin reached its all-time high of around $19,500 and the FGI reached an unprecedented level above 95. A prolonged bear market followed shortly thereafter, resulting in the Bitcoin price falling below $3,200 by the end of 2018.
April 2021: As Bitcoin rose to a record $63,500, FGI jumped to 91. This euphoric mood was soon followed by a sharp correction that saw its value halve to around $31,000.
November 2021: Bitcoin soared to its highest price ever, reaching $68,800. FGI broke through 90 again, indicating extreme greed. As expected, this peak was followed by a significant bear market.
June 2023: While the FGI approached 90, Bitcoin failed to break past its previous highs, indicating that momentum was waning. The market corrected shortly thereafter, confirming the pattern of pullbacks during prolonged greed phases.
2. Price behavior after FGI 90 violations
High Signal: Any time the FGI exceeds 90 historically marks a short-term price peak, causing sharp pullbacks shortly thereafter.
Increased Volatility: Markets driven by excessive greed often experience wild swings, with price corrections often ranging from 20% to 35%.
Divergence Indicators: When Bitcoin fails to make new highs despite elevated FGI levels, it indicates that the market is weakening and bullish momentum is exhausted.
3. Technical and behavioral aspects during extreme FGI
Overbought Conditions: During periods of extreme greed, indicators such as the Relative Strength Index (RSI) often enter overbought zones (usually above 75), signaling an overheated market vulnerable to corrections.
Volume Dynamics: Greedy sentiment is usually accompanied by an increase in trading activity. However, a sudden drop in volume after a price spike may indicate an impending pullback.
Chain metrics: Patterns such as increased miner selling, decreased activity by large wallets, and decreased whale holdings often coincide with extreme FGI levels, providing further evidence of potential market weakness.
4. Strategic adjustments to overcome extreme FGI situations
Profit-taking method: When FGI crosses 90, it is wise to take profits by gradually reducing positions or setting tighter stop-loss levels to protect profits from sudden drops.
Comprehensive Assessment: Combine FGI analysis with other metrics such as trading volume, network activity, and sentiment indicators to assess whether the market still has growth potential.
Emotional Discipline: Extreme FGI reflects widespread optimism that can cloud judgment. Investors should remain cautious, avoiding impulsive decisions driven by fear of missing out (FOMO).
5. Statistical observations and data analysis
Historical data suggests a 75% chance that Bitcoin's price will peak within one to two weeks after FGI exceeds 90.
The average price pullback after an FGI above 90 is between 20% and 40%, highlighting the need for vigilance during such periods.
Conclusion
While an FGI above 90 is generally considered to be an exuberant indicator, it also serves as a critical warning sign of potential market corrections. By understanding historical trends and connecting them to technical and on-chain data, traders can effectively navigate periods of extreme greed. Using strategic adjustments, maintaining emotional discipline, and following sound risk management principles are key to profiting during these volatile phases without falling prey to the dangers of market euphoria.
#DEXXBreach #Binance240MUsers #USUALonLaunchpool&Pre-Market #BTC ☀ #Bitcoin❗
