Extreme greed has taken over the crypto market as the industry anticipates that the United States Securities and Exchange Commission (SEC) will approve a spot Bitcoin exchange-traded fund (ETF) application this week.
Data from Alternative.me shows that the Crypto Fear and Greed Index currently sits at 76/100, representing a period of extreme greed among investors. The last time market sentiment spiked to this level was in November 2021, when BTC hit its all-time high, and the first Bitcoin Futures ETF went live in the United States.
- Source: alternative.me
Investors Become Extremely Greedy
The Crypto Fear and Greed Index analyzes investor sentiment on a scale of 0 to 100 using several factors like Bitcoin’s dominance and market momentum, with 0 signaling extreme fear, 50 indicating neutrality, and 100 showing extreme greed.
Based on the index’s assumptions, a market sentiment of 0 indicates worry and fear among investors, while 100 shows the market is on the rise and is due for a correction, a form of warning for investors to exercise more caution.
Last week, CryptoPotato reported that the index hovered around 71, signaling greed among market participants. The greed sentiment often triggers the fear of missing out (FOMO) among investors, leading to the impulsive buying and selling of digital assets. At the time, BTC rallied and traded above $45,000, but the sentiment signaled the spike would not continue for long.
Shortly afterward, BTC lost 11% of its value, causing over $591 million and $94 million in long and short liquidations, respectively, one of the crypto market’s largest since August 2023. Altogether, more than $1.8 billion in open interest positions were removed through sharp selling or forced liquidations.
Will History Repeat Itself?
The last time the crypto market sentiment slid to extreme greed was two years ago. The ProShares Bitcoin Strategy futures ETF, ticked BITO, had gone live on the New York Stock Exchange (NYSE), and within a month, BTC recorded its highest value of $68,700.
BTC is trading at $46,600 after a 4.5% increase in the past 24 hours, according to data from CoinMarketCap.
It remains to be seen if history will repeat itself as multiple asset management firms await the SEC’s greenlight to launch the first spot Bitcoin ETF in the U.S. The deadline for the agency’s decision is January 10, and the potential issuers have already filed their finalized S-1 updates.
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