ANALYSIS
FOMO and Greed is slowly creeping up again. At the same time, this recent 12% pullback is casting some doubts. In general, it seems like people can't put a finger on where we seem to be in this cycle.
Some Data I've been looking at suggests this is just the beginning. Let's put this sentiment into context by looking at different Market Risk Indicators.
TL;DR, we've got ways to go before we reach market risk similar to the last ATH - Part 2
The last time I posted this, people cricitized the rainbow chart (rightly so), so let's not use that one again.
Weekly RSI ()
Historically, whenever we reached the previous ATH, the RSI went on to have a one-year long period of overvaluation until setting the next ATH. We've just now broken our ATH from 2021 and the RSI is just entering overvaluation. Judging from previous cycles, this run-up looks very similar to what we saw in 2017. We've barely experienced a true bullmarket so far. This might be the beginning of one.
Alphasquared ()
Now this one is a tool I use specifically for evaluating market risk. Used it for the past year to stack bottom-level BTC and it's been unbelievably accurate. I'll start DCAing out at 80 risk and above.
The last time we broke through our previous 20k ATH in 2020, this indicator showed about 60 risk, which is where we are now. That's when the bull back then really started and sentiment on was similar to now. It feels eerily similar.
Fear and Greed Index ()
We all know the Fear and Greed index, so no need to explain what it is. For this one, we shouldn't evaluate the Index value itself, but rather how long it stays there. Similar to the RSI.
In November of 2020 we were close to touching the old 20k ATH, the Fear and Greed Index indicated a market risk of 88 and it hadn't been there for long. Back then Bitcoin more than tripled in value and the F&G Index stayed in extreme greed territory for almost a whole year. How long have we been in extreme greed this cycle? About a month. History shows, we can keep pumping for so much longer.
Verdict
All of these indicators plot a clear picture of early bullrun days and we're nowhere near extreme risk valuations. So when asking yourself if you should take profits, continue to DCA or similar, keep this in mind. Historically speaking, we still have ways to go.
