The cryptocurrency market fears the longest phase in more than a year, coinciding with a massive fall in bitcoins of more than 50%.
The once fashionable cryptocurrency has yet to recover, leaving the market and participants in a state of extreme fear. But past data shows that fear is often good for Bitcoin and helps the asset find support and at least short-term bottom.
Most importantly, Bitcoin price movement is perfectly correlated with fear and greed.
Fear is a real emotion that can cause panic even among the holders of the so-called “diamond hand” bitcoins. No emotion can induce people to act as irrationally as fear, except greed.
Greed can be even worse, as investors and traders cannot understand what is going on around them. When money is easy to get, it’s hard to hit the sell button and make a profit knowing that prices can be much higher.
Related reading | Bitcoin Bulls and Bears Wary of Potential Pump and Dump Fractal
When it comes to markets, these two emotions are almost never in balance, so the transition from one extreme to the other is especially noticeable.
Several investment legends have made a name for themselves and built their reputations in opposing positions, and there is a reason for this that couldn’t be more obvious than comparing the market cryptocurrency Fear and Greed Index to the price action of Bitcoin.
Fear and green correlates well with tops and bottoms | Source: BTCUSD on TradingView.com
The Only Easy Way To Make Your Regular Cryptocurrency Investments Successful
Be afraid when others are greedy and greedy when others are afraid. Buy blood on the streets. All of these well-known financial quotes are directly related to upstream trading. Why, then, can no one just control their emotions, buy when they get scared, and sell when others scream on social media about their winnings?
Crypto Market Fear and Greed Index against the price action of bitcoins shows how useful this “simple trick” really is and can do you. However, getting out of it is still extremely difficult.
Related reading | Five signs a Bitcoin fund is in
The fact is that no one knows this yet, and although in hindsight it seems obvious, in fact, things can go both ways. Being greedy when others are afraid and being afraid when others are greedy increase your chances of success.
Markets change direction when things are going for better or worse, and always when participants least expect them. By learning to change their way of thinking, traders can also learn to control these two critical emotions. This is why the most important thing in technical analysis is to stick to a strategy.
That being said, even if emotions do arise, there is a plan to go back to and reasoning to justify why you initially took this position: because fear is sometimes equated to the bottom of bitcoin.
Featured image from iStockPhoto, Charts from TradingView.com