With Bitcoin pumping, major altcoins flying, and new all-time highs being set, the crypto market fear and greed index is tapping highs not seen in over a year. In fact, the metric has achieved the second-highest reading in the index’s history.
What does soaring crypto market greed potentially reveal about where the current uptrend stands? Do Bitcoin, Ethereum, XRP, and others have more to run? Or is the early signs of a reversal ahead?
Contrarian Trading Advocated By Warren Buffet, Other Billionaire Traders
Be fearful when others are greedy, and greedy when others are fearful. It is a trading and investing quote passed down from Warren Buffett suggesting a contrarian position can be wildly profitable.
Oftentimes, when a market is overly emotional, investors can be blinded by strong returns and not see what’s right before their eyes: a reversal.
Related Reading | Here’s What Surging Crypto Market “Greed” Could Say About Today’s Drop
During the peak of the crypto hype bubble, several Reddit threads talked about which projects were “undervalued.” The same assets listed as not yet reaching a valuation representative of its promise, dropped in price by over 99% in the months following.
Especially when it comes to speculative assets like Bitcoin, value – like beauty – is in the eye of the beholder. Now that assets have once again risen by as much as 200% or more since the start of the year, is the market now acting too irrational and exuberant to realize a reversal is looming?
Crypto Market Fear and Greed Index | Source: Alternative.Me
Crypto Fear and Greed Index Reaches Second Highest Peak In History
Over the last week, the crypto market fear and greed index peaked at around 80, reaching the second-highest point since its creation.
The index is used to measure market sentiment during each peak and trough. It is often a helpful gauge in determining when trends may be reversing.
The theory that when the crypto market gets overly greedy, a selloff ensues follows the Oracle of Omaha’s above quote and guidelines.
The last time the reading rose to such levels, it signaled a long-term top in cryptocurrency. The highest peak ever was set one year ago – between the June 2019 top and the late September breakdown below $10,000.
Related Reading | How Crypto Market Fear And Greed Be Used Profitably As A Trade Trigger
The cryptocurrency remained trapped there for nearly a full year. Bitcoin and the rest of the market have been soaring, with some altcoins growing 9000% in just over three months. Such gains aren’t sustainable, and as soon as profit-taking starts, crypto assets often correct extremely hard.
Once the peak at greed breaks down again and reverses, will the crypto market fall all the way to fear again? Or will this simply be a short-term pullback on the asset class’s ongoing uptrend and climb into a new bull market?