Crypto Fear & Greed Index hits 74 as Bitcoin breaks $82K, but did it mark a local top?

Just a week since the start of September, BTC has already rallied to a near four-month high, surpassing the $82.2k level. Despite the pullback toward $78k, the market still seems to be pricing in further upside.

According to the Crypto Fear & Greed Index, greed is still dominating sentiment, with the index at 69. This means that there is a strong risk appetite even as Bitcoin trades near $80k. But with sentiment this bullish, could greed itself become a bearish catalyst?

Based on the chart above, the Crypto Fear & Greed Index has dropped from the peak of 74, which was observed on the 4th of September. So, while greed still dominates sentiment, it can be expected that the risk appetite is starting to cool off. 

Usually, Bitcoin tops are not formed until the index moves into “Extreme Greed,” where euphoria kicks in and investors are more inclined to realize profits.

Given that the index is currently at 69, it appears there is still room for BTC to rise before sentiment hits the overheated levels, and if so, BTC’s current sideways chop is merely a consolidation phase, not a topping pattern.

However, the macro FUD is only beginning. If the sentiment turns bearish, and BTC fails to retest the recent highs, would this bearish turn of greed be the first sign of the end of Bitcoin’s [BTC] September rally?

Crypto fear and greed index meets tougher macro backdrop

The reversal in the Crypto Fear & Greed Index is not a fluke.

On the macro front, this week could bring plenty of volatility with the key CPI data due for release. Moreover, the rate hike expectations have climbed back to 60%, which implies there is a growing concern around the upcoming FOMC meeting.

Furthermore, the US 10Y Treasury yield is still hovering around 4.8%, which means the financial condition is tightened, making the macro setup more challenging for the risk assets.

Notably, this is where the chart below becomes more interesting. According to Coinglass data, since the top of the Bitcoin price in October near $126k, the Crypto Fear & Greed Index has not entered the territory of extreme greed.

Instead, the previous market tops came when the index pushed deeper into the greed zone and then turned back.

So, if history is any guide, this reversal in the greed signal may be more than just a random move. 

With the macro backdrop growing ever more precarious, BTC’s retreat from the $82k peak, and tightening expectations of rate hikes, the investors’ risk appetite seems to be cooling down. Thus, the reversal in the greed signal could be an early warning that Bitcoin is approaching a local top.

And if this scenario continues to play out, BTC’s rally in September will most likely turn out to be a risky affair.

Final Summary