Widely followed crypto analyst Benjamin Cowen has his eye on an overlooked indicator that suggests Bitcoin (BTC) has significantly more upside potential soon.
In a new strategy session, Cowen tells his 722,000 YouTube subscribers about the Fear and Greed Index, which measures sentiment in the crypto markets.
Traditionally, traders will take a more bullish stance when the index is flashing maximum fear, and a cautious outlook when it points to greed.
Cowen breaks the index down with a 90-day simple moving average (SMA) to point out historic patterns. Based on his interpretations, the analyst says that once the 90-day SMA on the Fear and Greed Index dips below 30, BTC usually bottoms out and ignites rallies.
“What it does show, is that when the 90-day moving average is say, below 30… As long as you have the right outlook, as long you’re not thinking it has to go up tomorrow – because if you find yourself in some type of situation like let’s say 2018, it could still be a few months away – but historically speaking, when the 90-day moving average of the Fear and Greed Index is below 30, it tends to be a fairly attractive area to sort of move into the market.”
The closely tracked analyst says that historically, the herd typically gets the direction of the markets wrong, highlighting the utility of the index. He notes that for some time now, the index’s 90-day SMA has been below its key level.
“Overwhelmingly, it seems like most people just want to buy when the market is bullish, but really, if history is any indication, buying when the market is bearish seems to work out a lot better, because when you’re buying when the market is bearish, you’re buying when most people don’t want to, and typically the herd gets things wrong over a longer time frame.
So it would make sense in general if history is any indication to DCA [dollar cost average] Bitcoin when the market is bearish and wait for it to turn back bullish, which historically always has done…
Looking at the 90-day moving average, you can see that it’s actually been below that 30 threshold, essentially since mid-February, and we’re still below it, even now…
Again it is a lagging indicator so it’s not going to work out perfectly. If the price of Bitcoin were to come back own, I imagine the Fear and Greed Index could still hang out below 30 for a while.”
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