Appetite for greed returns to crypto market after months of extreme fear

After a prolonged period of risk aversion, crypto investor sentiment has seen a turn toward greed, marking a crucial turning point in market behavior. This transformation, confirmed by the Crypto Fear & Greed Index, reflects how market psychology can change dramatically in a matter of days, especially as assets begin to recover from their low levels.

Fear & Greed Index marks sentiment transformation

The gauge hit 61 last Thursday, according to Alternative.me data, representing the first reading in “greed” territory since October. This rise is especially important considering that just twenty-four hours earlier, the index stood at 48, a level considered neutral, evidencing the speed with which traders’ confidence is changing.

The indicator’s improvement comes after consecutive weeks in “extreme fear” and “fear” territory, when investors watched with extreme caution any market moves. With a reading of 61, the index points to a moderate recovery in risk appetite, albeit not reaching the extremes of greed typically seen near all-time market highs.

Bitcoin regains confidence as greed resurfaces

The revival of greed sentiment has kept pace with a major recovery in bitcoin. Over the course of a week, the largest asset by market cap went from levels near $89,800 to hit two-month highs around $97,704. This move has significantly contributed to restoring trust in the broader cryptocurrency ecosystem.

However, it is important to contextualize this recovery within the recent volatility. The market experienced a massive collapse during October when approximately $19 billion was liquidated in a single day, an event that triggered months of caution among traders. In the weeks that followed, the sentiment index posted extremely low readings, reflecting the deep uncertainty permeating the market.

Caution on the horizon: what sentiment indicators reveal

Analysts caution that sentiment indicators should be interpreted with context rather than as definitive signals. Historically, extreme fear has coincided with buying opportunities in the market, while sustained greed tends to emerge in periods close to major peaks. With the index at 61, there is considerable room before reaching extreme speculative readings.

At the moment, considering that bitcoin is trading at $85.37K with a variation of -4.42% in the last seven days, according to current data, the market remains at a breakeven point. Traders are watching closely to see if recent recovery levels can be sustained, especially as they assess whether this transformation of sentiment towards greed represents a lasting change or a temporary rebound within a still-volatile market.

Strategists note that bitcoin’s current behavior primarily reflects changes in short-term liquidity rather than fundamental macroeconomic transformations, suggesting that volatility continues to be a defining feature of the crypto market in this period.