The metric showing general community sentiment towards bitcoin, the Fear and Greed Index, entered the “greed” zone for the first time since 30 March 2022.
This could be the result of the rise in the price of the leading cryptocurrency during the first month of the year and the general revival of the entire market.
Contrary to the economic crisis that has spread around the world, bitcoin has started the year on the right foot. It is currently trading at around $23,000, which represents a 40% increase compared to the last day of 2022.
Bitcoin’s Fear and Greed index, which functions as an indicator of investors’ momentary sentiments towards the digital asset, was stuck in “fear” or “extreme fear” territory for several months due to the prolonged bear market and numerous bankruptcies and scandals in the industry.
However, the asset’s rise seems to have turned the tide, and today, the metric pointed to 55: “Greed”. The last time the index reached that level was about ten months ago.
It is worth noting that rising confidence among crypto investors should not be directly considered a catalyst for a new bull run. In fact, metrics that are in a state of “Fear” or “Extreme Fear” could indicate a good buying opportunity, while overly greedy investors could mean that the market is due for a correction.
Could BTC sustain the rally?
It is worth noting that rising confidence among crypto investors should not be directly considered a catalyst for a new bullish dynamic. In fact, metrics that are in a state of “Fear” or “Extreme Fear” could indicate a good buying opportunity, while overly greedy investors could mean that the market is due for a correction.
The impressive performance of the asset during the first weeks of 2023 led some to believe that a new bull market was approaching. Coping with the inflationary crisis could help a new bitcoin rally in the coming months.
Nearly every announcement of US CPI numbers has brought increased volatility for BTC, and generally, inflation spikes have pushed its valuation south. The data showed that US efforts to address the problems began to pay off. The inflation rate in the world’s largest economy was 9.1% in June (the highest in 40 years), while December’s figures registered 6.5%.
Another factor that could affect BTC’s price performance is the Federal Open Market Committee (FOMC) meetings, where the central bank has announced seven consecutive interest rate hikes in an attempt to curb runaway inflation.
The current benchmark rate stands at 4.5% (the highest in 15 years), while further increases are expected in the coming months. Anthony Scaramucci, founder of SkyBridge Capital, recently opined that the Fed will stop raising interest rates when inflation cools to around 4-5%, supposedly spurring a bull run for digital currencies.