- The fear and greed index tracked by CNN Money has moved to the extreme greed area.
- Bitcoin is about to form a golden cross on the daily chart.
Investors have gotten extremely greedy as hopes of a lighter monetary policy remains. The closely-watched fear and greed index by CNN has jumped to the extreme greed zone of 75. This level is slightly higher than where it was last week. At the same time, the crypto fear and greed index is slowly drifting to the greed area. Bitcoin price has pulled back from the year-to-date high of $24,335 to the current $22,865.
Fear and greed index rises
The financial market is usually guided by greed and fear emotions. In most periods, asset prices rise when investors are getting greedy and fall when they are fearful. We experienced this during the Covid-19 pandemic when interest rates were at historic lows.
Low-interest rates coincided with a period when the American government was unleashing trillions in stimulus spending. Bitcoin surged to an all-time high of near $70,000 during that time. American stocks like Nasdaq 100 and S&P 500 indices also surged during that time.
Read more: How to buy Bitcoin.
The fear and greed index jump has coincided with a period when shorts liquidations have eased recently. According to CoinGlass, short liquidations surged to a multi-month high of $141 million on January 14. The next big day for liquidations was January 20 when short sellers liquidated over $85 million worth of coins. Recently, however, the amount of longs and shorts liquidations have been fairly even.
The main catalyst moving Bitcoin price is the recent economic data from the United States, which revealed that the economy created over 500k jobs in January, leading many investors to believe that the Fed will continue hiking interest rates. Higher rates tend to be bearish for BTC prices.
Most parts of the fear and greed index have moved to the extreme greed zone. Stock price strength and breadth, put and call options, and safe haven demand have moved to the extreme greed area. While the main index is mostly on stocks, it can be used in crypto because of the correlation of the two assets.
Bitcoin price prediction
Bitcoin’s daily chart is sending mixed signals. On the daily chart, it is nearing the golden cross pattern, where the 200-day and 50-day moving averages (MA) make a crossover. In most periods, the crossover is usually a bullish sign. It remains above the two averages.
At the same time, Bitcoin has formed what looks like a cup and handle pattern. The relative volume has continued dropping. Therefore, there is a likelihood that BTC will retest the support at $21,492 and then resume the bullish trend.
