Traders Call For Altseason As Market Greed Increases, Signaling A Local Top In The Coming Weeks

After a weekend slump that saw Bitcoin’s price to drop to $40,300, BTC has bounced back today, reaching $43,000. This shows that traders are still bullish about Bitcoin, which had its strongest November since 2020 and is on an upward trend in December. However, the recent surge in interest towards altcoins has raised eyebrows among market analysts as this might be a clear sign of greed, a potential red flag or market top for investors.

Market Faces A Greed Factor

The crypto market went through a sharp decline in the past few days, as Bitcoin could not sustain its bullish drive above $44K and fell to $40K. But the market has bounced back as BTC reached $43K, due to investors buying the dip. This has also boosted many altcoins, which are seeing large increases on the price chart, indicating that the greed is settling down.

Currently, the fear and greed index trades at 72. Market sentiment plays a crucial role in cryptocurrency valuations. The Fear and Greed Index, a tool used by investors to gauge market sentiment, has shown a noticeable tilt towards greed during this period. Historically, such a tilt has often led to market corrections or downturns.

Extreme interest in altcoins, as observed recently, can be an indicator of market traders chasing high returns without due diligence. This behavior is typically associated with greed, a sentiment that can lead to irrational investment decisions.

Santiment reported that the market corrected in July, as traders’ excessive demand for the alt season created a market peak, followed by a drop. Likewise, the present altcoin greed could fade away soon, which could cause another temporary high for the crypto market before ETF approval.

However, after dropping below $42,000, BTC rose again despite $4 billion worth of BTC being sold in two days, reaching the highest level in 18 months. The rebound could reflect the markets’ confidence that a spot BTC exchange-traded fund (ETF) will get the green light in January 2024, and the anticipation of approval is accompanied by large cash inflows from institutional investors.

Cooling Inflation Boosts Crypto Demand

Even with many macro challenges, Bitcoin keeps rising, reaching a 150% gain since the start of the year with more volatility. Some Bitcoin experts think the Binance and DOJ agreement is positive for a spot Bitcoin ETF approval, citing a comparable deal made by Arthur Hayes and BitMEX. The possibility of a spot Bitcoin ETF approval has encouraged hodling, which accounts for 70% of the total Bitcoin supply.

Bitcoin (BTC) recovered to above $43,000 for the first time since the flash crash on Monday, boosting the crypto market and the stocks of companies focused on digital assets, as the Federal Reserve (Fed) hinted at lower interest rates for next year.

The U.S. central bank officials kept the Fed funds rate at 5.25%-5.5% on Wednesday after the December Federal Open Market Committee (FOMC) meeting, but they forecasted the rate would drop to 4.6% by the end of 2024, implying about three 25 basis point reductions.

Most analysts expect three rate reductions in 2024 to bring inflation closer to the 2% goal. Fed Governor Christopher Waller even proposed the hypothetical option of starting to lower interest rates in the spring, depending on how well inflation behaves. Low interest rates can push the crypto market to new buying demand.

Reports say that an ETF approval could create $600 billion in new demand. CryptoQuant analysts think that an ETF approval will boost Bitcoin’s market value by $1 trillion. Galaxy Digital expects a 74% price rise in the first year following a spot BTC ETF launch. The SEC could approve a spot Bitcoin ETF between Jan. 5 and Jan. 10.