Generally, such conditions, according to the popular motto of warren buffett, are excellent buying opportunities: “Be afraid when others are greedy. Be greedy when others are fearful.”
Despite this, a simple and direct interpretation of this indicator in the crypto market could lead to a quick liquidation of funds. Extreme fear often starts early in the dips, and extreme greed long before the ups end.
Furthermore, a historical analysis of the moving averages of the Fear and Greed Index shows that even the end of the declines did not mean the beginning of the uptrends. It turns out that always several months elapsed from the extreme lows of the index to the start of the cryptocurrency bull market. This time was generally a period of long consolidation and a sideways trend.
The crypto market analyst @Pladizow tweeted a chart of the price of BTC, pointing out areas where the index gave extremely low readings. It confirmed, based on our analysis, that the indicator has been this low only 4 times in history (the March 2020 crash appears twice on its chart). Nevertheless, He added that “after the first two, the price fell much more.”
Source: Ambito
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