The crypto market is in absolute fear for the longest phase in over a year, coinciding with a massive drop of over 50% in Bitcoin.
The once trending cryptocurrency has yet to recover, leaving the market and participants in a state of extreme fear. But as past data shows, fear is often a good thing for bitcoin, and helps the asset find support and at least a short-term bottom.
Bottom Lines: Bitcoin Price Action Is Entirely Related to Fear and Greed
Fear is one hell of an emotion and the so-called “Diamond Hand” could sell bitcoin holders as well. No emotion comes close to prompting humans to act more irrationally than fear, other than greed.
Greed can be even worse, blinding investors and traders to what is happening around them. When money is easy, it’s hard to click that sell button and secure a profit, knowing that prices can move a lot.
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The two emotions are almost never in equilibrium when it comes to the markets, which makes the change from one extreme to the other particularly noteworthy.
Many investment legends have made their names and built their reputations based on contradictory positions, and there is a reason for this that couldn’t be more clear than comparing the crypto market fear and greed index with bitcoin price action.
Fear and green correlates well with tops and bottoms | Source: BTCUSD on TradingView.com
A Simple Trick for Regular Crypto Investing Success
When others are greedy and others are greedy, be afraid. Buy blood in the streets. All these famous finance quotes refer directly to the opposite business. Then again, can’t one just control their emotions, and sell it when things get scary and when other people are raving about their gains on social media?
crypto market fear and greed index bitcoin price action Shows how this “one simple trick” really works and can make you rich. Yet it is still extremely difficult to pull off.
Related Reading | Five Signs that Bitcoin is Down
The fact is that no one knows at the moment, and although it looks obvious from behind, things could really go either way. Being greedy when others are fearful and being fearful when others are greedy improves your chances of success.
Markets reverse when things are at their best or worst, and always when participants least expect it. By learning to change their thinking, traders can also learn to control these two important emotions. This is why in technical analysis, sticking to the strategy is of paramount importance.
By doing this, even if emotions arise, there is a plan to come back and argue why you took the plunge in the first place: because fear sometimes equals bottoms in bitcoin.
Featured image from iStockPhoto, Charts from TradingView.com