Despite slowly recovering from fear, the market is now going back to extreme fear without a major price drop. With that, the price of Bitcoin, although recovered to around $50K, the price still went down to $47K, and the market is now in a state of extreme fear.
Bitcoin Fear and Greed Index
Despite its massive spike in November, the price of Bitcoin in November took a different turn, with the market shifting from extreme greed to its current extreme fear status. The Bitcoin fear and greed index ranks the market at just 22 at the price of around $47K at the time of the report.
Despite the market sentiment regarding BTC slowly recovering from its drop-down to $46K, the cryptocurrency hasn't managed to shift into a bullish run just yet. To add, Bitcoin hit strong resistance at around $50K, but despite constantly brushing the resistance, BTC still fell.
When Will Bitcoin be Bullish Again?
As of the moment, Bitcoin is still trading quite close to its support, putting the market in a state of extreme fear. Although not as harsh as a drop previously seen when the price of BTC went from a whopping $69K down to $46K, the strong resistance and the failure of Bitcoin to break it indicate the market might be stuck either going sideways or downwards for quite a while.
In order for BTC to once again become bullish, it still has to break its resistance at around $50K. Should Bitcoin break the $50K resistance mark, the price could resume becoming bullish once this happens. CoinDesk estimates the resistance for a bullish trend is at $50K to $55K.
Taking Profits During Extreme Greed
Extreme fear is usually a state where new and inexperienced investors panic and start selling their assets when it comes to market psychology. However, for smart investors, this could be an opportunity to buy the asset at a discount, as explained by Investopedia.
As for extreme greed, on the other hand, this is where non-investors or other individuals that weren't originally interested in investing bought in with the asset reaching new heights. Due to all the attention Bitcoin got when it started making new all-time highs, a lot of new investors joined in.
When smart investors find the market is in a state of extreme greed, however, this is when they start to take profits, and due to the accumulation of their assets, this is usually when the price starts going down.
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Using the RSI Indicator with the Bitcoin Fear and Greed Index
Due to the number of smart investors taking profits and the volume they own collectively, the effect on the price could be quite significant. To add, this is technically what happened during the drop, which can be seen on CoinGecko.
One indicator that works well with the Bitcoin fear and greed index is the RSI which indicates when an asset is either oversold or overbought. Using the RSI helps swing traders buy when the asset is oversold and sell when the asset is oversold.
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This article is owned by Tech Times
Written by Urian B.
