Sentiment Pendulum Swings to Extreme Fear. Time to Rise?

About a week ago I decided to asked Google AI a question: “Is high frequency trading being used in the cryptocurrency markets?” As you can see, the answer is yes.

Now anyone investigating this relatively new technology and market in history knows that derivative trading (futures and options) are another tool in trading cryptocurrency.

This means that with much smaller capitalization in these crypto companies mixed with derivatives (producing large amounts of leverage) and high frequency trading (speed of light computer trading), these markets are going to be very volatile.

Does this mean that these markets should be dismissed by most individuals? Probably. However, if you are patient, I believe you can take less risk, avoid trading highly leveraged products, and still grow a small portion of your investments in cryptos. What I have seen recommended in the 2 years of looking at this market (yes, I am a late comer), like the massive stock and bond markets, the tools of technical analysis and sentiment (fear and greed indices) can prove very beneficial when navigating the cryptocurrency markets.

• If one is buying Bitcoin as a form of money like cash or gold, the decision is not one of trading, but one of holding as a means of protecting the value of your purchasing power from the erosion of the money printers, the central banks.

  
  

What is sentiment showing us now in US stocks and cryptocurrencies?

 [Source: Feb 26, 2025 Coin Market Cap Crypto Fear and Greed Index]

Update/Record low of last 20 months/ Feb 26

Yesterday, we saw Bitcoin plunge below below the 90,000 level and stay there. Could it go lower? Of course. It might go to the 200 day moving average.  

However, if we return to the free tools at the Coin Market Cap Crypto Fear and Greed Index Page, we find that this mornings reading of 26 (2/26) is now the same as last seen at the September low. This reading is the lowest in sentiment over the last 20 months.

Update/ February 26

I could kick myself for not focusing more on the rare extreme greed numbers in late November and early December. You will notice that there is not a great deal of time that the CMC Crypto fear and greed index was over 80, reflecting a few weeks out of the last 20 months. While this is a great time to trim positions or take gains, you can see from the grey line (the price of Bitcoin), that a sharp decline in sentiment was not being reflected in the PRICE of Bitcoin, since it went sideways for weeks and weeks.

Update/ February 27/notice 200 day moving average with crypto sentiment readings

It is also interesting that today we find the CNN fear and greed index at “extreme fear”.

[Source: CNN Fear and Greed Index, above/below]

If you look at the chart above, you will notice that there are only 3 times this reading went below 25; Aug 5, 2025,(17) Dec 19, 2024 (22), and Feb 25, 2025 (23).

At this point, I would not be the least bit surprised if we have hit the bottom, or are very close to reaching it on Bitcoin. Here is another interesting fact. Since the 88 sentiment high on the CMC Crypto Fear and Greed Index on 11/21/24, until today, we only saw one day where Bitcoin fell below 90,000. That was on January 13th, when it fell to 89,153, but recovered over 5,000 points higher by the close of US equity markets. Yesterday, Bitcoin reached a low of 85,944 with a price of 88,609 at the close of US equity markets. Today, the Crypto Fear and Greed Index matched the same very rare and low reading (26) of last September. Today’s CNN Fear and Greed reading (22) was also very low and rare as shown in the timeline above.  

What about US stocks?

The 100 day moving average and the extreme high FEAR reading shown in the 2 sentiment indicators continue to tell us the bull is still alive in stocks and we should go higher in the weeks ahead (short term).

What about interest rates?

The Federal Reserve started cutting rates in September at the LOWEST yield of 2024. In December they said that they were pausing rates. Two months later, yields on 10 year US Treasuries Bonds have DECLINED. 3 month US Treasury Bills have stayed the same.

Does the Federal Reserve really have control of interest rates? They are ALWAYS behind what has happened with 3 month US Treasury Bill yields, yet are seen as the great wizards of money.

What about the metals?

The $3000 level in gold is a place where it could stall and go sideways for a period of time. This should impact the other metals as well. However, when one looks at gold, silver, and platinum (all having ETFs for the retail investor), technical analysis and our historical juncture support these metals should become much more valuable, especially as global debt and the interest in central bank digital currency by central banks continues to be the only solution from the global finance boys.

So yet again, we turn to sentiment readings and moving averages to help us with investment decisions in a world that certainly has its problems.

As always, if you have a question or would like to make a comment, please post it below. You can also respond by using the group email that alerted you to this post.

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Disclaimer: Best Minds Inc was closed in 2018. I am retired. Nothing I am writing should be taken as advice to buy or sell any form of security or asset. Everyone must study and consider their own situation before putting money anywhere, as well as understanding they are living in a time where major changes at the highest levels of money are taking place. These writings are free.