The recent crypto market recovery has seen digital assets in the space post gains as high as 50%. This has seen more money flow into the market and in the wake of this has been the increase in the total crypto market cap. After languishing below $2 trillion for months, the total market cap has now made it back above this coveted point, turning investors’ sentiments along with it.
Crypto Market Turns Greedy
The Fear & Greed Index helps to measure how investors are feeling towards the crypto market. It does this by measuring across a number of data points and putting the final result into a numbered chart for easy interpretation. For the last few months, this index has fluctuated in and out of the fear territory, spending more time within it than it has outside of it.
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However, this trend has made a complete 180 as the market responds to the recent price increase in the market. The past weekend saw cryptocurrencies, large and small alike, move back into the green. Bitcoin, Ethereum, and others surged above resistance points, putting bulls back in control of the market. With this came the turning point for investor sentiment.
Market goes into greed | Source: alternative.me
The Fear & Greed Index has now pointed to greed after this tremendous rally. The index which had been mostly in the fear territory for the previous week saw a sudden change, going from 30 to 60 on the chart.
As the market continues to post gains, this number is expected to grow given that investors are now looking at the digital assets in a more positive light.
What This Means
Since humans are driven by emotions, the decisions they make when it comes to their investments are no different. This is why measuring how investors are feeling towards the market can be a good indicator of where the price might go next.
When the index is in greed like it is now, it sparks ‘FOMO’ in investors. This is what happens when digital assets are rising across the board and investors are putting more money into the market due to the fear of missing out on more potential gains.
Total market cap recovers above $2 trillion | Source: Crypto Total Market Cap on TradingView.com
While this can drive up the price of the assets further, it is important to note that this can usually be temporary. Because this sudden uptick in price can only lead investors to dump their bags and take gains. Thereby driving the price of the cryptocurrencies down just as quickly as it went up.
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On the flip side of this, when the market is in the fear territory, it is often a time for accumulation because a lot of investors are usually too wary to put money in the market. This way, other investors who understand the market snatch up coins at what can often be described as a ‘discount price.’
Nevertheless, the market being in the greed territory is a good sign for crypto. It means that the bears have lost their hold on the market and could very well set the digital assets on a path to new all-time highs.
Featured image from Los Angeles Times, charts from alternative.me and TradingView.com
