Ripple's XRP and Ethereum fall - what triggered the decline?
Ripples XRP and Ethereum suffered losses overnight. The reason: after two brutal months, the crypto market recently reached a level of greed not seen since April.
The Crypto Fear and Greed Index - a collective metric that estimates current sentiment in the crypto market - remains in the "greed" zone, while most major cryptocurrencies have started the new week with an increase in price.
The index reflects daily emotions and sentiments for Bitcoin (BTC) and other major cryptocurrencies. These are collected and analysed from various sources. These include current market volatility, volume, momentum and social media behaviour.
Greedy for Bitcoin
The metric, which scales from 0 (maximum "fear") to 100 (ultimate "greed"), typically passes through the "neutral" zone and enters the "greed" zone during periods of strong price rallies when demand for cryptocurrencies exceeds supply.
After Bitcoin's price drop in mid-May, the crypto fear and greed index indicated "fear" in the market for more than two months.
Market sentiment started to change at the end of July, and finally the Bitcoin index reached "extreme greed" levels again on 14 August.
Greedy for Ethereum
Similar to Bitcoin, the fear and greed index for Ethereum (ETH) has also been staying in the "greed" zone lately.
Sentiment around the world's second largest cryptocurrency (by market cap) also escalated into a state of "extreme greed" following the launch of a major upgrade to the Ethereum network on 5 August: EIP-1559.
The upgrade included a reducing measure designed to curb the cryptocurrency's supply growth. This drove up the price of Ethereum and pushed the index pointer to "extreme greed" on 8 August, when it rose to 79 points.
Based on the metric's two simple assumptions, "extreme fear" signals investor apprehension and the opportunity to buy, while "extreme greed" signals the market's readiness for a correction.
Since both cryptocurrencies have only recently started to show tendencies that evoke extreme sentiment, there is still plenty of room for the reawakened greed to work its magic and drive prices higher.
Did Andrzej Sapkowski, a Polish economist and fantasy author ("The Witcher"), have "the moon" in mind when he said: "Human greed knows no bounds"?