While the price of Bitcoin and Ethereum had picked up some momentum, sentiment was rising around the crypto market. Both these digital assets have been able to hit new two-month highs after the price jump. This resurgence saw increasingly positive market sentiment outweigh negative and pushed the Fear & Greed Index closer to “greed”. However, before the market could enter this green zone, the retracement started.
The crypto market runs away from greed
The correction in prices had put the market sentiment on a positive path which it had not seen in a while. Optimism had grown so rapidly that more than 30 points were added to the Fear and Greed Index during this time period. This meant that the market was able to break out of the “extreme fear” zone and move into the high end of fear.
Slowly but surely, the index had seen a recovery approaching greed. At its highest, it had reached a score of 44 on the index, only 6 points away from “Greed”. This was when the price of Bitcoin was trading near $25,000, and Ethereum beat $2,000.
The trend was expected to continue, and the market would eventually find itself greedy once again. But this time it is not going to happen. After touching a new 4-month high of 44, the market had retreated sharply and this retracement was accompanied by a reversal in investor sentiment.
Market retraces before hitting "Greed" | Source: Arcane Research
Currently, the Fear and Greed Index sits at a score of 41, still in “fear” territory. This comes as Bitcoin has made its way below $24,000, and Ethereum threatens to drop below $1,800.
Bitcoin, Ethereum may see recovery
Now, the recent retracement in the market is not significant from the established margin. Bitcoin lost nearly $2,000 from the top of its value, and Ethereum lost a few hundred dollars. The fact that both digital assets have been able to find support during this decline shows that there is still more momentum than expected.
BTC declines below $24,000 | Source: BTCUSD on TradingView.com
Additionally, the market is fueling news of an upcoming Ethereum merge. There’s still about a month left in the upgrade, and the anticipation continues to mount. So given what the market has recorded over the past few weeks, the recovery is likely not to end.
A short retracement is not one of the typical following periods where cryptocurrencies have returned double digit gains. Contrary to popular belief, corrections are often good for the market. Both these digital assets also continued to trade above their 50-day moving averages. This indicates that there may be another surge for the market.
Featured image from crosswalk.com, charts from Arcane Research and TradingView.com
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