Despite Bitcoin’s multiple uses in daily life, at the end of the day, cryptomoney is still a financial instrument. And therefore, one of the main drivers behind its price behavior is investor speculation. This is why it is so important to try to understand what goes on in the minds of currency traders in order to know where it will go. And right now, the Bitcoin index is approaching extreme greed.
Bitcoin reaches a new high in 2020, what happened?
The price of Bitcoin
The last few months will become part of Bitcoin’s history. For, since the Third Halving in the Blockchain of cryptomoney, all the eyes of the crypto world are on the price of it. In the face of the expectation generated by a possible radical increase in its price thanks to the positive effects that Halving would bring on its supply.
Although most of the analysts of the crypt world consider that the decrease in the rate of increase of the monetary liquidity of BTC, added to a stable demand, should generate a new rally in the crypt currency. The first weeks after Halving were marked by the stagnation in the price of Bitcoin. It remained around $9,000 until a few days ago.
Thus, when pessimism began to reign among crypto users, since July 21 the price of cryptomoney has been rising steadily to over $11,000. Generating positive expectations once again among crypto traders. They expect this to be the start of a new big Bitcoin rally like the one that drove its price to nearly $20,000 in 2017. Something that is reflected in the Bitcoin Index.
What is the Bitcoin Sentiment Index?
Extreme greed reaches the Bitcoin Index
The Bitcoin index is one of the most useful tools for traders in the crypto market. Well, it reflects the general mood of the traders regarding Bitcoin. And since BTC’s price performance depends on the interaction between supply and demand of these traders. The Bitcoin Index is a perfect indicator of where the currency price will go.
And in the days before, we’ve seen a slow but steady increase in traders‘ optimism about Bitcoin. Going from a situation of fear in the previous month, through moderate greed in the last few weeks, to the extreme greed reflected in the index today.
However, we should not let this fool us. Well, such Crypto Trader optimism about the price of Bitcoin is not positive for the market either. It would indicate an excess of speculative impulses in traders‘ buying and selling decisions. This, although it brings gains in the short term, necessarily leads to a drop in the price in the medium term.
This is so, if the speculative impulse leads to the crypt-currency above what would be 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. Which makes this index our Tip of the Day here at CryptoTrend.