In the closing month of January so far, Bitcoin has risen by about 40%. The Fear and Greed Index, which in the early days of the year was around 25 points, today indicates “greed” in the cryptocurrency market. Does this signal further increases in the BTC price? Or is a correction now to be expected?
The rapid rise in Bitcoin price in January 2023 led the Fear and Greed Index to a high level of “greed.” Today’s index reading of 61 is a value not seen in the cryptocurrency market for more than a year:
Just recently, BeInCrypto reported that the Fear and Greed Index had returned to neutral figures (around 50) after 9 months of being in “fear” territory. In contrast, today the sentiment of cryptocurrency market participants is at its highest in 14 months.
The last time the Fear and Greed Index was above the 60 level (red line) was on November 16, 2021. At that time, the price of Bitcoin was $62,000 and had just started a decline from the all-time high (ATH) set a couple of days earlier.
Today the Fear and Greed Index is at 61, while the price of BTC is dropping after recording a local peak at $23,960. Market sentiment is once again in greed territory, despite the fact that the largest cryptocurrency is priced $38,000 lower today than it was in November 2021. Moreover, Bitcoin is still 65% below its ATH.
Is the “greed” on the Fear and Greed Index a signal of an upcoming bull market?
However, arguments can be drawn from the above data for a potential bullish trend reversal. Historically, the recovery of the “greed” area has been associated with a prediction of an upcoming surge in Bitcoin price.
So far, 3 times in the history of Fear and Greed Index data, it has regained an area above 60 points after previously diving into extreme fear levels below 20 (red dots). It turns out that after each of these events, Bitcoin price experienced large increases:
- On February 22, 2019, the index increased to 63 and the BTC price was $3779; over the next 124 days, BTC surged 254% and peaked at $14,000.
- On July 28, 2020, the index increased to 76 and the BTC price was $10,954; over the next 260 days, BTC surged 486% and peaked at $64,500.
- On July 31, 2021, the index increased to 60 and the BTC price was $41,719; over the next 102 days, BTC surged 66% and reached an all-time high of $69,000.
Averaging, historically Bitcoin has taken 162 days to generate a 269% profit after the Fear and Greed Index entered greed territory above the 60 level. If such increases were to occur now as well, counting from the current valuation, the closest peak can be expected at $86,000 on July 11, 2023.
This would not only be a breakthrough of the current ATH, but also an unprecedented achievement of new peaks in the BTC price before halving. According to current estimates, this event is scheduled for March 28, 2024. In previous cycles, Bitcoin has reached a bull market peak about 12-18 months after halving.
Bitcoin season
In the context of the positive data from the Fear and Greed Index, it is worth looking at one more indicator. Many cryptocurrency market participants look at the Bitcoin market with as much interest as they pay great attention to altcoin prices. It is on their charts that investors look for the biggest gains when the altcoin season emerges.
One of the best indicators of a potential altcoin season is the Altcoin Season Index created by BlockchainCenter.net. It has three versions: monthly, annual, and quarterly (90 days). And it is the latter that is considered the best measure of the cryptocurrency season.
The Altcoin Season Index ranges from 0 to 100. Values below 25 indicate a Bitcoin season, while values above 75 indicate an altcoin season. The range between 26 and 74 is a neutral area, where Bitcoin and altcoins perform equally well or equally badly.
The indicator performance over the past two months oscillates in the 25-35 area, while today Altcoin Season Index points to 27. This means that however, altcoins are trying to keep pace with Bitcoin, and the market is clearly leaning towards the dominance of the orange cryptocurrency.
Moreover, in the chart below, we can also see that the short altcoin season took place between August and September 2022. If the chart continues the downward trend, we could soon have a big Bitcoin season.
For BeInCrypto’s latest crypto market analysis, click here.
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