Despite the multiple uses that Bitcoin has in daily life, at the end of the day the cryptocurrency is still a financial instrument. And therefore, one of the main drivers behind the behavior of its price is speculation by investors. Therefore, it is so important to try to understand what goes through the minds of currency traders to know where it will go. And right now, the Bitcoin index is approaching extreme greed.
The price of Bitcoin
The last few months will become part of the history of Bitcoin. Well, since the Third Halving in the cryptocurrency Blockchain, all eyes of the crypto world are on the price of it. Faced with the expectation generated by a possible radical increase in its price thanks to the positive effects that Halving would bring on its supply.
And it is that, although a good part of the crypto world analysts consider that the decrease in the rate of increase in the monetary liquidity of BTC, added to a stable demand, should generate a new rally in the cryptocurrency. The first weeks after the Halving were marked by the stagnation in the price of Bitcoin. Which remained around $ 9,000 until a few days ago.
Thus, when pessimism began to reign among crypto users, since July 21 the price of the cryptocurrency has been increasing steadily to exceed $ 11,000. Generating positive expectations once again among crypto traders. Those who hope that this is the beginning of a new great rally of Bitcoin like the one that took its price to almost $ 20,000 in 2017. Something that is reflected in the Bitcoin index.
Extreme greed hits the Bitcoin index
The Bitcoin index is one of the most useful tools for crypto market traders. Well, it reflects the general mood of traders regarding Bitcoin. And since the performance of the price of BTC depends on the interaction between supply and demand of these traders. The Bitcoin index is a perfect indicator of where the price of the currency will go.
And in the days before, we have seen a slow, but steady increase in traders’ optimism regarding Bitcoin. Going from a situation of fear in the previous month, going through a moderate greed in the last weeks, until reaching the extreme greed that the index reflects today.
However, we must not let this fool us. Well, such great optimism around the price of Bitcoin is not positive for the market either. Well, it would indicate an excess of speculative impulses in the buying and selling decisions of traders. Which, although it brings profits in the short term, necessarily leads to a drop in price in the medium term.
This is so, if the speculative impulse takes the cryptocurrency above its natural market price, as soon as this impulse ends, the market will have to correct itself. So from now on, we must be particularly careful with our investments in BTC. What makes this index our Today’s Data here on CryptoTrend.