Trade cryptocurrencies using Fear and Greed Index – part 2/2
How to use the Fear and Greed Index to predict market reversals!
The Fear and Greed Index tends to reverse when it approaches “Extreme Fear” territory, while it is a bit less reliable when it approaches “Extreme Greed”. The “Extreme Fear” is the moment when fear transitions into very early and slight signs of greed. At that point, it reverses to the upside directly into greed territory, as opportunists start putting their money into the market.
If people feel greedier towards Bitcoin reversals when the market sentiment is at extremely fearful levels, will Bitcoin’s price follow to the upside?
The reversal points have plotted analogously to the BTC/USD’s price chart on the Fear & Greed Index.
“Extreme Fear” levels on the Fear and Greed Index have always resulted in upswings and bullish reversals in Bitcoin’s price. Every time the Fear and Greed Index reached near-extreme levels of fear, a price reversal in Bitcoin’s price came. Extreme fear towards Bitcoin (and most top cryptos) has historically translated into a financial opportunity for the ones that decide to invest.
One big reversal was the mid-December of 2018 when the fear was extreme. At that point, Bitcoin bottomed at $3,200 before starting its new upswing.
The Fear and Greed Index is a great indicator to use when predicting when a bottom has formed on the Bitcoin chart. It surely is a great additional indicator that can show where and when a rally could approximately occur.
Although it won’t tell us exactly at which specific price point a reversal will happen, the Fear and Greed Index is certainly a valuable tool when it comes to timing a shift in market sentiment.
If history is a good teacher (and history does repeat itself), it is likely that people’s feelings towards Bitcoin are shifting dramatically sooner rather than later.