Crypto greed index goes extreme, reaches highest level since 2021

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The crypto greed index has climbed to its highest point since late 2021, when Bitcoin reached its all-time high. The greed index reached the “Extreme Greed” rating at 79 yesterday, February 13, and now sits at 74. 

This new peak follows Bitcoin’s movement in the past week, with the alpha cryptocurrency trading between $51,700 and $52,000 at the time of writing.

The Crypto Fear and Greed Index is a major tracking tool that gauges market sentiment in the crypto industry, marking factors such as volatility, market momentum (changes in volume), social media, dominance, and other trends.

The index calculates based on 25% of market volatility, 25% of market momentum, and 15% from social media and trend indicators such as Google Trends. Maintained and calculated by Alternative.me, a software analytics and comparison platform, traders usually use the index to make decisions on exiting, entering, and leveraging their positions based on market movements. 

With extreme fear, a buying opportunity can be considered. On the other hand, extreme greed could indicate that the market is due for a short-term correction, signaling selling opportunities for investors who wish to cash in on their gains. The index is updated every 12 hours and reacts to short-term changes in the crypto market.

Hitting an extreme greed score for the first time in years shows a revival of optimism among crypto investors on the heels of the long-awaited launch of spot Bitcoin exchange-traded funds (ETFs) in the US last month. As ARK CEO Cathie Wood predicted, some short-term selling pressure created a “sell the news” effect for traders to leverage.

“That would be very short-term because what we think is going to happen here is that the SEC is going to be giving the spot Bitcoin ETF the green light for institutional investors to participate,” Wood said.

A day after the spot Bitcoin ETFs were approved on January 10, the index scored 76, signaling extreme greed.

Cryptocurrencies remain highly volatile, news-driven assets. While informative, the crypto fear and greed index is not a substitute for individual research and risk management strategies. This resurgence of extreme greed hints at renewed bullish momentum as Bitcoin mounts its first concerted attempt to maintain its price above $50,000 this year.

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