The “Fear and Greed” index reached its highest level since November 2021, when Bitcoin traded at an all-time high.
Warren Buffett once said, “Be fearful when others are greedy, and be greedy when others are fearful.”
The Crypto Fear and Greed Index, which tracks market sentiment, is showing warning signs for investors. The index reached 84 on February 19, surpassing 79, the highest level since November 2021, when Bitcoin peaked at $69,000.
If history repeats itself, some downside could be just around the corner.
Bitcoin has been trading around $52,000 in recent days amid a wild rally for the cryptocurrency. Ether also saw little movement today, trading at $2,778, according to Coingecko. Both have seen him rise 20% in the past two weeks.
The last time the index reached this level was in mid-November 2021, shortly after which the market crashed, with Bitcoin plummeting 25% from $69,000 to $50,000 in one month.
Bitcoin and the broader crypto market are heating up as Wall Street financial institutions accumulate record amounts of capital through the recently launched Spot Bitcoin ETF. And with Bitcoin's halving just a few months away, the euphoria could soon take hold.
But despite the bullish rhetoric that permeates the industry, history has shown that things can change in an instant.
According to a market intelligence company Santimentothe growing call for all-time highs on social media, as we're seeing now, has tended to mark local highs in the past.
just a meme
However, not all investors take the Fear and Greed Index seriously.
“I don't see any index of fear and greed,” he says alex krugeran economist and partner at Asgard Markets, an advisory firm specializing in macro, capital markets, and cryptocurrencies.
Krueger told The Defiant that this is “just a memetic” and should only be used as a proxy when traders don't have the tools to properly assess the market. Krueger said these tools include interest rates, funding metrics, perpetuals, open interest, and many other metrics.
According to Krueger, the market is “hotter,” especially since Bitcoin surpassed $50,000, so he advises investors to “reduce risk a little bit, but stay there for a very long time.” .
Despite Krueger's advice, anything above 74 on the Crypto Fear and Greed Index is considered extreme greed, and traders and investors are urged to tread carefully.
Perhaps heed Mr. Buffet's advice.
