With the Bitcoin price hitting a new all-time high above $82,000 on Monday morning, crypto investor optimism has reached extreme levels.
A key indicator of market sentiment, the Crypto Fear and Greed Index, jumped to an “Extreme Greed” reading of 78 out of 100 on Sunday, marking its second highest level this year after March’s peak of 82. By Monday morning, it was back to a reading of 76.
The drastic change in market sentiment has seen the index move from neutral (49) just 30 days ago to its current elevated position. Generally, this indicates a market environment characterized by increased optimism and potential risk-taking behavior from investors.
A rise in sentiment coincides with Bitcoin jumped above $80,000 for the first time on Sunday, hitting a new all-time high above $82,100 on Monday morning, up 3.6% on the day, according to CoinGecko data.
Historical data shows a steady upward progression in price and sentiment since 2018, indicating a maturing crypto market.
Ethereum also saw relative gains, reclaiming $3,000 last week, and extended that rally to a high of $3,241 Monday morning, according to CoinGecko data.
Meanwhile, meme coins such as Floki and Elon are also seeing spikes, with Dogecoin reaching its highest price in three years.
Cryptocurrency prices and US elections
The broader market enthusiasm comes amid a changing geopolitical backdrop, with Donald Trump securing a second term as US president in what billionaire investor Mike Novogratz called the “most important day” for crypto. Trump has made pro-crypto promises a pillar of his campaign, with the market expecting greater regulatory clarity following his election.
“Clearer rules and a friendlier attitude towards crypto businesses can potentially increase investor confidence, further encourage innovation and widespread adoption of virtual digital assets,” said Vishal Sacheendran, Head of Markets regional at Binance, in a note shared with Decrypt.
Fear, Greed, and Market Movements
Although the Bitcoin Fear and Greed Index relies on several weighted components specific to Bitcoin, it also serves as a general indicator of the broader crypto market.
According to data from Coinglass, the Crypto Fear and Greed Index shows a consistent trend following Bitcoin price movements, with significant market corrections typically materializing within one to three weeks of reaching “Extreme” territory. Greed.”
Prolonged periods in the “Extreme Greed” zone (75-100) have historically preceded market corrections, although the timing and magnitude of these movements remains unpredictable.
The most notable example occurred in February 2021, when the index peaked at 95 before Bitcoin reached $64,000 in April 2021 and dropped to $30,000 in the following three months. Index data reveals that market sentiment fell to an extremely low level of 10 at that time.
Data from Coinglass also indicates that more than $123 million in short Bitcoin positions were liquidated in the last 24 hours, with the price increasing by 3.6% during the same period.
Although there is often a strong correlation between price movements and sentiment readings, the relationship is not always direct. Market volatility and other external factors can influence sentiment aside from price action, creating occasional divergences.
“Based on this data alone, the short-term market has accumulated some risks with BTC prices reaching new highs,” says Willy Chuang, COO at Woo X.
“Historically, the Fear & Greed Index can reach as high as 90 in extremely bullish market conditions; Currently, at 76 years old, he has entered a risky phase,” Chuang said. Decryptadding that a decline in prices is “inevitable in the future as a continued release of risks” during the uptrend.
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