Fear and Greed Index Rises as Crypto Waits for This Catalyst
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Fear and Greed Index Rises as Crypto Waits for This Catalyst

Crispus Nyaga
Crispus Nyaga
25th May 2023
  • The fear and greed index has jumped to the greed area.
  • This happened as American tech companies like Nvidia soared.
  • The debt ceiling issue is a major catalyst for stocks and cryptocurrencies.

Cryptocurrency prices were mixed on Thursday as volume remained sharply lower and as stocks jumped. Bitcoin remained below $27,000 while BNB Coin approached $300. Ethereum price was trading at $1,795. At the same time, CNN Money’s fear and greed index jumped to the greed zone of 64 while Bitcoin’s index remained at the neutral zone of 51.

Fear and greed index rises

The fear and greed ndex, which measures the two main extremes in the market turned green. This rebound happened as American technology stocks jumped after the strong Nvidia earnings. The Nasdaq 100 index jumped by 155 points while the S&P 500 index jumped by 15 points.

Historically, the fear and greed index rises when stocks are rising and when there is a risk-off sentiment. A closer look at its sub-sectors shows that the put and call options jumped to the extreme greed area. Junk bond demand, safe haven demand, and market momentum rose to the greed level.

Market volatility, which is represented by the VIX index, which I wrote about here, has moved to the neutral point of 20.

The main catalyst for the fear and and greed index was the strong results by Nvidia, the biggest semiconductor company by market cap. The firm said that its business boomed in the first-quarter as demand for artificial intelligence jumped. As a result, the Nvidia, C3.ai, and AITX stock prices jumped. Similarly, AI cryptocurrencies like Singularity’s AGIX and The Graph also rose.

Debt ceiling news as a catalyst

A key theme affecting stocks and cryptocurrency prices is the debt ceiling issue. In the past few weeks, Democrats and Republicans have deliberating on how to raise the debt ceiling. With time running out, there are concerns that the American government will default.

A default would be catastrophic for stocks and cryptocurrencies like Bitcoin, Ethereum, Bella Protocol, Waves, and ApeCoin. It would also lead to a major drop of other assets like commodities and bonds.

This is where an the debt ceiling issue creates an opportunity for Bitcoin and other cryptocurrencies. I believe that the two sides will ultimately reach a deal in order to avoid the imlications of a default. As such, since cryptocurrencies have dropped in anticipation of a default, I suspect that these assets will rally when the two sides reach a deal.

The deliberations are simply working as expected. Since the two sides have hard line positions, they are simply squeezing as much as possible from their rivals. As such, if a deal happens, it will remove the most serious risk to the market. As a result, it will lead to a rally in both stocks and cryptocurrencies.

Author Bio
Crispus Nyaga
Crispus Nyaga
Crispus is a financial analyst with over 9 years in the industry. He covers cryptocurrencies, forex, equities, and commodities for some of the leading brands. He is also a passionate trader who operates his family account. Crispus lives in Nairobi with his wife and son.