Bitcoin’s (CRYPTO: BTC) rally could be overextended, according to readings from the Fear & Greed Index.
What Happened: Bitcoin rallied to a four-month high of $57,793 on Tuesday and was trading at $56,354 midday Wednesday.
Bitcoin Fear and Greed Index is 78. Extreme Greed
— Bitcoin Fear and Greed Index (@BitcoinFear) October 12, 2021
Current price: $56,925 pic.twitter.com/iwA8ILZRTr
According to a sentiment analytics tool from Alternative, market sentiment was at 78 on Tuesday, indicating that investors were in a zone of “Extreme Greed.”
“The crypto market behavior is very emotional. People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). Also, people often sell their coins in the irrational reaction of seeing red numbers,” said the creators behind the index.
“When investors are getting too greedy, that means the market is due for a correction,” they added.
Last week, Cointelegraph reported that there have been some instances where Bitcoin’s price has remained in the “overbought” territory for longer than three or four weeks.
“It's important to keep the macro perspective in mind amidst short-term volatility,” commented popular crypto trader Rekt Capital on Twitter .
“The BTC multi-month downtrend has been broken last week. But when trendlines like this break, it is not out of the ordinary for BTC to dip towards them for a retest attempt.”
Image by Viktor Forgacs on Unsplash.