Bitcoin Sentiment Gauge Suggests Potential Recovery Amid Recent Price Movements
Bitcoin recently broke out of a descending channel that had constrained its movements since July, only to encounter a reversal in its price momentum after hitting $66.5k as a local high.
An analysis by Santiment, a crypto market intelligence platform, highlighted the overwhelmingly bullish sentiment among traders, raising concerns of a possible market top and subsequent panic selling if BTC prices declined further.
This sentiment was vindicated by a 5% price dip observed on Monday, leaving the market questioning whether a recovery is on the horizon or if the recent high was indeed a peak.
Insights from the Bitcoin Fear and Greed Index
Examining the fear and greed index revealed that there is no need for immediate panic among market participants. The sentiment currently hovers around a neutral position, oscillating between neutrality and fear in recent weeks.
This index derives its score by considering various factors such as volatility, trading volume, social media interactions, Bitcoin dominance trends, and Google Trends statistics.
Analysts at CryptoCrypto delved into the fear and greed index’s performance over the last quarter, noting a gradual uptrend in sentiment during September, particularly in its latter half. Yet, this surge was insufficient to tip the scales into “greedy” territory.
Evaluating the Breakout Attempt
The price movements since June have been marked by a series of lower peaks and troughs. Despite breaching the recent lower high at $65k on August 25 and surpassing the highs of the descending channel, this breakout was short-lived.
Within a span of four days, Bitcoin experienced a 4.7% pullback, slipping back into its range and below the resistance zone of $64k to $66k.
The On-Balance Volume (OBV) managed to exceed the prior high from August, albeit marginally. However, the lack of strong follow-through from the price action indicated a hesitancy among bulls in the short term, leading them to opt for profit-taking.
The Directional Movement Index (DMI) had exhibited a robust uptrend during the breakout phase, with both the +DI and Average Directional Index (ADX) surpassing the 20 level. Although they still remain above this threshold, their gradual decline suggests a potential test of the support zone around $60k to $61.5k.
Disclaimer: The views expressed herein do not constitute financial advice or any form of recommendation and solely reflect the author’s perspective.