Fear and greed are just two basic emotions driving the price action behind all markets, including Bitcoin and other cryptocurrencies.
A strange correlation was discovered in the on-chain Bitcoin network data that directly matches the cryptocurrency market “fear and greed” index. Here’s why this finding is so striking and what information investors, traders and analysts can gather from the data.
Bitcoin behavior: Fear and greed appear in unspent transaction outputs
Bitcoin, the way the network and its user base behave is unique. As a result, certain tools have been developed to analyze the on-chain metrics of the cryptocurrency network, including the total number of transactions, how much money is spent, and much more.
The data also includes very specific and customized information such as unspent transaction output (UTXO).
As a speculative asset, nothing else behaves like Bitcoin. Changes in sensitivity push the price action to the extreme. As a result, tools have been developed to monitor fear or greed in the market.
Interestingly, a crypto analyst found that the percentage of UTXOs in profit matched perfectly with the index of fear and greed.
So since the data only goes back to 2018, we all wonder what the fear and greed index looks like in bull markets.
So we've all been wondering how the Fear & Greed index looks in bull markets since the data only goes back to 2018. I figured it out today. This is the F&G index compared with the data on % of BTC UTXOs in profit provided by @glassnode: pic.twitter.com/TF0ywd4Ble
— Stillman (@Stillm4n) February 22, 2021
Each peaks and troughs in the fear and greed index are eerily aligned with UTXO data superimposed on the Bitcoin price chart. Since the data matches so accurately, it could potentially be incredibly useful for timing peaks in the current bull market.
UTXOs provide tips for earning gains from past crypto cycles
The fear and greed index was launched in 2018 when the bear market started. The index was born in the bear market and only reached the point of true greed a few times.
When Bitcoin reached greed in 2019, a sharp reversal took place to retest the bottoms. Since then, Bitcoin has steadily risen in the index of fear and greed.
There is an opportunity to potentially understand how fear and greed arose in previous bull markets, using UTXO data that matched very well with the fear and greed index after the vehicle was released.
In 2013, there were two major impulses fueled by greed, followed by a bear market. In 2017, the bull market moved freely for almost a full year, bulging bumps on the chart.
A total of five major protrusions emerge following two triangular peaks in 2017. During this cycle, there is a third triangular shaped vertex. But so far there is only one mound. Does this mean that Bitcoin can have up to four bullish impulses before it reaches its peak?
Everything is possible. However, if the fear and greed index starts to decline in the upcoming time frames, it could be a sign that a new bear market is starting.