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Crypto Nears Full Month Of Extreme Greed As Famous Buffett Letter Resurfaces

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Bitcoin’s price is back above $11,800 after a sharp fall last week into the weekend. However, even a $1,000 rejection wasn’t enough to shake the market out of its extended state of greed.

According to a sentiment measuring index, the cryptocurrency market has reached its longest stretch of extreme greed ever. The record was set, just as a famous Warren Buffett letter from 2000 resurfaced, meant to act as a reminder to be fearful when others are greedy.

Bitcoin Rally, Altcoin Resurgence, Brings Crypto Market To Extreme Greed

If you’ve spent any amount of time in investing or trading at all, chances are you have come across a famous Warren Buffett quote whether you realize it or not.

The “Oracle of Omaha” as he’s called, is known to be one of the greatest investors ever to live. Buffett also followed a rather simple philosophy: buy assets with long-term value.

RELATED READING | BITCOIN BLASTS BACK ABOVE $12,000, SETS NEW HIGH FOR 2020

He also was an advocate of contrarian investing, and among his most famous quotes advises investors to “be fearful when others are greedy” and to be “greedy when others are fearful.”

The quote suggests that when markets are exuberant with recent gains, it could be a signal a correction will follow. And its always when things get the scariest in markets when assets begin to reverse and recover.

Sentiment is tricky to gauge. Much of it is gut instinct, but if bullish comments dominate bearish ones by a large margin, that information could be telling. To assist crypto traders with a better understanding of where market sentiment is, a “Fear & Greed Index” was developed.

Wise Words From Warren Buffett On How Greed Is Blinding

This tool, after the recent Bitcoin rally and altcoin season, has reached its longest stretch of extreme greed ever at a full month. And it could be a sign that its time to be fearful, as Buffett advises.

In the past, the tool, pictured below, has reached a higher point. But even during that previous extended phase of extreme greed, it wasn’t concurrent, with moments of falling back into more modest levels of greed. There were also moments when greed spiked higher, however.

crypto market fear and greed index bitcoin

This nearly one full month of extreme greed in the crypto market comes after the total market cap is up over 90% year to date. It also has arrived alongside a revival of another famous Buffett quote.

RELATED READING | BITCOIN, ETHEREUM, AND MAJOR CRYPTOS FALL AS DOLLAR FINALLY REVERSES

“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs,” Buffett wrote in a shareholder letter from 2000. “Nothing sedates rationality like large doses of effortless money.”

total crypto market cap cryptocap

CryptoCap Total Monthly (Calculated by TradingView) | Source: TradingView

Along with the crypto market being up over 90% year to date, the market has grown over 230% from the Black Thursday low. Billions of dollars have been added during this time, just waiting for investors to begin taking profit and securing the paper gains that they are greedily salivating over.

When that profit-taking begins, and after such a large rally, things could head back into extreme levels of fear rather quickly. And just like a sign that extreme greed was the moment to be fearful when things get scary again, it may be time to buy.

Featured image from Unsplash.
Charts and pricing data from TradingView



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3 things traders are saying about Bitcoin and the state of the bull market

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Bitcoin’s (BTC) dip below $29,000 on June 22 rocked the markets a handful of analysts to call for a potential drop below $20,000. 

Many traders on crypto Twitter were focused on the formation of a death cross on the Bitcoin chart as an omen for another potential drop in the price but analysts with a more contrarian point of view look at this chart pattern as a signal that it is time to buy the dip. 

Three reasons why some traders still see a bull case for Bitcoin include the appearance of the “spring” stage of the Wyckoff accumulation model, steady buying by long-term holders and the formation of a bear trap at the golden ratio that is similar to moves seen during previous bull runs.

The Wyckoff model says spring has arrived

The Wyckoff accumulation model has been all the rage amongst cryptocurrency analysts over the past month as the price action for Bitcoin has been tracking the pattern relatively closely since the May 19 sell-off.

As seen in the tweet above, Bitcoin’s plunge below $29,000 and the subsequent recovery above $32,000 has some analysts suggesting that the “spring test” seen in phase C of the Wyckoff pattern has been fulfilled. This would indicate that the bottom is in for the current correction and now begins the choppy climb higher.

If this turns out to be true, BTC would enter phase D, also known as the “markup phase” where a new uptrend is established and “pullbacks to new support offer buying opportunities” that are often seen as opportunities to buy the dip.

Related: Bitcoin drops below $36K as century-old financial model predicts big BTC crash

In phase D a breakout to new highs is expected as the cycle completes and prepares to potentially begin again once the move higher is exhausted.

Long term holders are still bullish

Another bullish sign cited by analysts is the steady accumulation by long-term holders.

The Bitcoin long-term net holder position shows that investors actually began to reaccumulate back in late April and they began to significantly increase their activity in May as the price fell into the $30,000 to $40,000. On-chain data shows that these investors have continued to buy into the most recent dip.

This activity suggests that more experienced crypto traders are familiar with Bitcoin’s market cycles and view the current range as a good level to open long positions when fear is high and the sentiment is low. 

The biggest rewards go to those who take the risk to buy an asset amid plunging prices and sentiment, and these are the types of situations where the contrarian traders thriv.

A bear trap lurks at the golden ratio

The third scenario some analysts are focusing on suggests that the current price movements have set up a bear trap that echoes a move seen during the last cycle which involves a pullback to the 1.618 golden ratio extension level which will then be followed by a breakout to new highs.

From this perspective, the market is currently in the awareness phase of the four psychological stages of asset bubbles. After the bear trap occurs, Bitcoin will enter the mania phase where widespread media coverage attracts the attention of new market participants who then chase the price to ever-increasing heights “based on the delusion that the asset will keep going up, forever.”

Previous calls for the possibility of Bitcoin reaching a price of $200,000 by the third or fourth quarter of 2021 by veteran trader Peter Brandt, who was far from alone in predicting its value to surpass the $100,000 mark this year, would suggest that the long-expected blow-off top is yet to come.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.