Re: Extreme greed on the market

Hey guys,
By recent Fear&Greed Index bitcoin is in extreme greed area, usually it's a sign of decline in price or even crash. I've been observing this index for quite some time and find it pretty accurate, of course it doesn't give you the exact day or time but it indicates the sentiment on the market. Do you ever use this index in your trading analysis?

Just like funding rate and long vs. short data, it's good to keep an eye on it. It's good for giving a warning of impending capitulation or blow-off top, yes.

Unfortunately, it can be deceptive. I can't tell you the number of times I've heard "the index is greedy, we need a correction!" and then the correction doesn't come until price is 20-30% higher.

Sentiment works a lot like momentum oscillators like RSI and such. During a range market, it's safe and sensible to sell overbought and oversold levels. However during a very strong trend, momentum can become embedded in overbought or oversold zones for a long time. In the same way, during a very strong bull trend, the market can remain "greedy" for quite some time before the eventual crash comes.

To put it more simply: it's pretty difficult to trade based on sentiment alone because it's difficult to time. You'll want to look for other technical reversal signs too.

People thinks that bitcoin is now in overbought area where they thought that any time a retracement or a dump that may happen but it is just a myth, when it comes to a trending cryptocurrencies; the overbought and oversold is not working. Actually the bitcoin is really indicating a bullish sign because it is now consolidating above RSI 70 which means the trend is really strong. The overbought area and oversold is only working when the market is non trending or it is in sideways wherein if the RSI touch the RSI 70 expect that the price will make a swing down while if the price touch the RSI 30 Expect a swing high that will happen. But in this case, it is not working because the bitcoin is currently trending.

When a market is oversold or overbought two scenario tend to happen firstly the market might experience a minor pullback or retracement before continuation in the previous direction or a total reversal will ensured.
Bitcoin is in overbought regions presently confirmed with RSI with 4 hour, daily and weekly timeframe however its quite difficult to envisage that its going to dump based on that indicator we should remember that 'price is the king', you really nailed it here that trending cryptos markets doesn't correlate with or obeys overbought and oversold decisions, personally I will wait for the retracement and re-enter the market based on Price Action while taking profits at the appropriate zones.

I'm more comfortable trading when the market fully retraced because I'm not used to buy when the price is in parabolic movement because I have doubts where I think that the price may go down easily if I buy. The market structure of the bitcoin is really good and for me the recent breakout is indicating a healthy trend where we can expect another rally that may come. People think that they are already late to buy bitcoins but it is wrong because remember that there are too many opportunities in the market; we should just be prepared in order for us to get that opportunity that can greatly increase our portfolios.