Data shows that Bitcoin market sentiment has reached extreme greed levels after this cryptocurrency hit a new high of over $111,000.

The fear and greed index of Bitcoin has surged recently

The "Fear & Greed Index" is an indicator created by Alternative, which tells us about the average trader's sentiment in the Bitcoin and broader cryptocurrency market. This index uses a scale from 0-100 to represent sentiment. All values above 53 indicate greed among investors, while values below 47 indicate fear. An index lying between these two thresholds implies a net neutral sentiment.

In addition to these three main zones, there are two 'extreme' zones referred to as extremely greedy (above 75) and extremely fearful (below 25). Currently, market sentiment lies in the first of these two zones, according to the latest value of the Fear & Greed Index.

Historically, extreme emotions have significant implications for Bitcoin and other digital assets, as they are where major tops and bottoms tend to form. However, this relationship is inverse, meaning an overly optimistic atmosphere makes tops likely to appear and excessive despair makes bottoms more probable.

Some traders exploit this reality to calculate when to buy and sell. This trading technique is often referred to as contrarian investing. Warren Buffet's famous saying summarizes the core idea: "be fearful when others are greedy, and be greedy when others are fearful". With extreme greed sentiment returning to Bitcoin, it is likely that those adhering to this philosophy will start looking for ways to exit.

That said, the Fear & Greed Index currently has a value of 'only' 78. For comparison, the peak in December occurred at around 87 and the peak in January was 84. Earlier in the bull run, this index even reached a much higher peak of 94 in November.

Thus, it is likely that the current market is not overly hot in terms of sentiment, assuming that demand from investors does not decrease. However, it remains to be seen how Bitcoin and other cryptocurrencies will develop under this extreme greed.

Speaking of demand, whales have just made a significant withdrawal from the Binance platform, as community analyst CryptoQuant's Maartunn pointed out in a post on X.

The indicator displayed on the chart is the "Exchange Netflow", which tells us about the net amount of Bitcoin moving in or out of wallets associated with a centralized exchange, in this case, Binance.

Clearly, Binance Exchange Netflow has observed a significant negative value, implying that investors have moved a substantial amount of money off the exchange. More specifically, the net outflow from the platform reached 2,190 BTC or approximately $237 million.

This likely indicates demand from large investors for holding cryptocurrency in self-custody wallets.