Fear & Greed Index Recovers After Predicting Market Bounce

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The cryptocurrency market is recovering slightly after the main market sentiment indicator hit yearlong lows.

The Fear & Greed market index measures the overall sentiment of market participants and other sources. Previously, we noted that the index hit year-low values, which is usually a good indicator for the market since the following bounce comes immediately after.

Fear And Greed Index
Source: alternative.me

After the recent price drop of Bitcoin and the overall outflow of funds away from digital assets, the market index hit 10—which is considered extreme fear. Right after that, Bitcoin and other cryptocurrencies started regrowing their value.

At press time, Bitcoin was trading at the value of $37,300 after a retrace from $40,000 within a couple of hours. Recovery was most likely followed by the fact that Amazon denied a recent report about a cryptocurrency acceptance plan.

Bitcoin daily chart
Source: TradingView.com

A market-to-index correlation was always a thing with the Fear & Greed indicator. Before the recent market bounce, the same event occurred in March 2020, when the indicator once again hit 10 and Bitcoin immediately recovered.

Usually, the following correlation is tied up to the fact that it matches the oversold and overbought states of the market with additional technical indexes like the Relative Strenght Index or Bollinger Bands.

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