After most states of 'extreme greed', BTC tends to surge towards higher prices.
Article author: 0x9999in1
Source: MetaEra
According to Alternative.me data, on November 19 and November 19, the cryptocurrency fear and greed index rose to 90, clearly indicating that the market is still in a state of 'extreme greed'. Moreover, since November 12, the cryptocurrency fear and greed index has not fallen below 80, and the market sentiment remains high.
Cryptocurrency Fear and Greed Index
The cryptocurrency fear and greed index includes multidimensional metrics, created by the investment analysis website Alternative.me, aimed at measuring the general market's view of crypto assets. The specific indicators are divided into volatility (25%) + market trading volume (25%) + social media popularity (15%) + market surveys (15%) + Bitcoin's proportion in the overall market (10%) + Google trends analysis (10%).
The measurement range of the cryptocurrency greed and fear index is 0-100, with lower scores indicating more fear and higher scores indicating more greed. Scores of 0-24 represent 'extreme fear', meaning investors are selling off in large amounts and exiting the market. Scores of 25-49 represent 'fear', indicating a considerable number of investors are selling, while market interest remains low. Scores of 50-74 represent 'greed', indicating significant buying is happening, leading to price increases. Scores of 75-100 represent 'extreme greed', indicating the market is very hot, and a market 'bubble' may burst soon.
During times of panic, investors may want to establish their crypto asset positions at lower costs, while others fear entering the market. Similarly, in times of greed, investors may want to delay purchasing new crypto assets or even sell some cryptocurrencies while prices are still high.
However, it is worth noting that this index mainly focuses on Bitcoin and pays less attention to other crypto assets, so the cryptocurrency greed and fear index has certain limitations and does not fully represent the user sentiment of the entire crypto market.
BTC market direction under extreme greed
Combining the current BTC market conditions, after BTC broke new highs multiple times since reaching $70,000, it has been hovering around $90,000 in recent days, corresponding to a high cryptocurrency greed and fear index that has remained above 75.
Using history as a mirror, let's also look at whether past bull market phases have a certain correlation with the cryptocurrency greed and fear index. Since the cryptocurrency greed and fear index was proposed in January 2018, the times when it has been in an 'extreme greed' state with values of 80 and above are June 2019, December 2020, January and February 2021, October 2021, May 2024, and November 2024.
These times correspond to the early stages of BTC breaking new highs, and after most states of 'extreme greed', BTC tends to surge towards higher prices. Currently, BTC has broken through $97,000, creating a historical new high, and is less than $3,000 away from breaking the revolutionary $100,000 mark. Based on the historical patterns of the cryptocurrency greed and fear index, BTC may stabilize at the $100,000 mark in the next 1-2 months.
The cryptocurrency fear and greed index is indeed a very objective tool for reflecting market sentiment, allowing users to clearly and accurately perceive the investment sentiment of others in the market. However, at this point, the decision to invest or sell is often influenced by one's own emotions. If an unexpected black swan event occurs, the cryptocurrency fear and greed index may actually affect investors' decisions and judgments. How to effectively use these cryptocurrency investment tools is often an important topic for exploring the Web3 world.
