Bitcoin and Ethereum Retrace Before Crypto Sentiment May Reach ‘Greed’
Sentiment around the crypto market had been on the rise as the price of Bitcoin and Ethereum had gained some momentum. Both these digital assets had been able to reach a new two-month high after the price surge. This resurgence quickly saw positive market sentiment erode over negative, pushing the Fear and Greed index close to “Greed”. But before the market could enter this green territory, the retracement began.
The crypto market shies away from greed
The rise in price had put market sentiment on a positive path that it had not seen for some time. Optimism had grown so rapidly that the Fear & Greed Index had seen more than 30 points added during this time period. What this meant was that the market had been able to clear out of “extreme fear” territory and cross into the higher end of fear.
Slowly but surely, the index had seen the recovery move closer to greed. At its highest, it had reached a score of 44 on the index, just 6 points off “Greed”. This was when the price of bitcoin had traded near $25,000 and Ethereum had hit $2,000.
The expectation was that this trend would continue and the market would finally find itself back in greed. But that would turn out not to be the case this time. After reaching a new 4-month high of 44, the market had quickly retreated, and with this retreat had come a reversal in investor sentiment.
Market retraces before hitting "Greed" | Source: Arcane Research
Currently, the Fear & Greed Index has a score of 41, still in “Fear” territory. This comes as Bitcoin has recovered below $24,000 and Ethereum threatens to fall below $1,800.
Bitcoin, Ethereum may see recovery
Now, the latest decline in the market has not been significant with established margins. Bitcoin lost about $2,000 from its peak, and Ethereum lost a couple of hundred dollars. The fact that both digital assets have been able to find support during this drop shows that there is still much more momentum than expected.
BTC declines below $24,000 | Source: BTCUSD on TradingView.com
In addition, the market has been pumped by the news of the upcoming Ethereum merger. The upgrade is still about a month away and expectations continue to rise. So based on what the market has seen in the last couple of weeks, the rally is probably not over.
A small retracement is not out of the ordinary after periods where cryptocurrencies have made double-digit gains. A correction is often good for the market, contrary to what one might think. Both these digital assets also continue to trade high above their 50-day moving averages. This indicates that a new bounce may come to the market.
Featured image from crosswalk.com, charts from Arcane Research and TradingView.com
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