- Bitcoin's fear and greed index has bounced back to 30.
- Bitcoin has also formed an inverted head and shoulders pattern.
The crypto fear and greed index points to sustained fear in the crypto market despite the recent rebound. Bitcoin price was trading at $17,870 on Wednesday, slightly higher than the year-to-date low of $15,520. The BTC to GBP was trading at 14,370 while the BTC/EUR price was trading at 16,600.
What is the fear and greed index?
The financial market is mostly driven by fear and greed. When things are going well, investors tend to get greedy and buy more. We saw that well during the 2021 crypto and meme stock comeback.
On the other hand, investors tend to get fearful when things are not performing well. Therefore, the fear and greed index is a tool that provides an estimate of where things stand in terms of the two.
The most widely used index was created by CNN Money and is commonly used in the stock market. It looks at the sentiment in the market by identifying the performance of key areas like the stock market breadth and strength, put and call options, market momentum, and safe haven demand among others.
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The Bitcoin fear and greed index aims to replicate this performance in the crypto market. It looks at market volatility, social media activity, dominance, and Google trends. It ranges between 0 (very fearful) and 100 (very greedy).
In some cases, experts recommend buying when it is in the fear area and short when it gets extremely overbought. This is based on a popular Warren Buffett quote: buy when everyone is fearful and short when they are greedy.
However, based on its performance, Bitcoin price tends to do well when the fear and greed index is in the greed area and vice versa. This happens because it usually has momentum when investors are greedy.
Therefore, with the index being at the fear area of 30, it means that it is making improvements since it was at 24 last month. This means that the coin could continue rising for a while.
Bitcoin price prediction
The 4H chart reveals that the BTC price has been in a slow bullish comeback in the past few days. In this period, it has formed an inverted head and shoulders pattern, which is a bullish sign. The coin is also above the 25-day and 50-day moving averages while the RSI has moved to the overbought level.
Therefore, because of the H&S pattern, I suspect that Bitcoin will continue rising as buyers target the key resistance at $19,550. This price is derived by measuring the distance between the head and shoulder
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