"Skeptics often dismiss tools like the Fear and Greed Index as too simplistic, arguing that they can't capture the nuance of institutional flows. But writing off sentiment ignores a fundamental truth that institutions are still run by people, and people remain prone to the same cognitive and emotional biases that drive market cycles, regardless of how deep their pockets are!"
"Even though volatility has dampened compared to earlier cycles, the move from $15,000 to over $120,000 is far from underwhelming. And crucially, Bitcoin has achieved this without the kind of deep, extended drawdowns that marked past bull markets. The ETF boom and corporate treasury accumulation have shifted supply dynamics, but the basic feedback loop of greed, fear, and speculation remains intact."
"It's not just Bitcoin that's susceptible to parabolic runs, bubbles have been part of markets for centuries. Asset prices have repeatedly surged beyond fundamentals, fueled by human behavior. Studies consistently show that stability itself often breeds instability, and that quiet periods encourage leverage, speculation, and eventually runaway price action. Bitcoin has followed this same rhythm. Periods of low volatility see Open Interest climb, leverage build, and speculative bets increase."
Institutional adoption and ETFs have altered Bitcoin's supply and demand, reducing volatility and preventing deep, extended drawdowns seen in past cycles. Sentiment remains a dominant force because institutions are run by people who are subject to cognitive and emotional biases. Periods of low volatility encourage leverage, rising Open Interest, and speculative bets that can fuel parabolic price action. Stability often precedes instability as professional capital can accelerate bubbles by chasing momentum and piling in late. Historical market behavior shows assets repeatedly surge beyond fundamentals driven by human behavior, making bubbles a persistent risk for Bitcoin despite greater maturity.
Read at Bitcoin Magazine
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