With bitcoin up around 4% on the day so far at $51,700, ethereum up 4.3% at $2,750, and some altcoins matching, or far surpassing these gains, the market has entered into the extreme greed sector of the Fear and Greed Index.
A time-tested market index
It’s quite a basic sign of which way the market is going to go next, but the Fear and Greed Index measures the age-old and trusted sentiments of fear and greed.
When the price has been going up for a while, and retail investors are jumping in and pumping up the transactional volume of an asset, it means that there is a lot of greed in the market, and thus, a correction will be coming.
On the other side of the coin, when an asset has been falling in price for a good while, and traders and investors are starting to sell heavily because they fear an even further price drop, it shouldn’t be too long before the price rallies.
This fundamental analysis has been tested over time and always holds true. It takes a very good trader, who is able to keep their emotions in check, to know the best times to buy and to sell. Most retail traders however, will tend to trade with their emotions; buying when the price is going up, and selling when it is going down.
Source: https://alternative.me/crypto/fear-and-greed-index/
Currently, the Fear and Greed Index is at 74 (Greed). However, the index is lagging, and this accounts for yesterday’s down day. That said, yesterday the Index was in the Extreme Greed sector at 79. With this in mind, tomorrow’s read out may well surpass this given the huge price action for $BTC and for most of the altcoin market.
Time to take some chips off the table?
Therefore, when there is extreme greed in the market it is a very good time to be thinking about taking some chips off the table, and if you are riding the price up, it is incumbent upon you to make sure you have stop losses set, and that you are keeping your risk management up to date.
Finally, is it likely that altcoins will continue to pump as bitcoin starts to falter? This will probably depend on the Bitcoin Dominance chart, which is seeing some lower highs and lows. If dominance continues to drop then yes, there is a good chance that altcoins could take over from bitcoin, at least for a while.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
