Bitcoin's surge has pushed sentiment in the cryptocurrency market into the 'extreme greed' zone for the first time in 616 days.

On Aug. 25, blockchain media outlet Cryptopolitan reported that the crypto fear and greed index stood at 81, rising to the extreme greed level for the first time since Dec. 17, 2024.

Bitcoin has risen more than 22 percent over the past seven days. Market sentiment also reversed sharply, jumping to 81 this week from 36 a month ago and 41 a week ago. CoinMarketCap said this was the fastest shift in sentiment this year from one extreme to the other. Compared with the year's low of 5 on Feb. 5, the market mood has fully turned from fear to greed in six months.

However, assessments differed somewhat by indicator. Alternative.me still categorised market sentiment as 'greed'. The index level is about 6 percent lower than 81, but it points to the same upward trend.

The starting point of the rebound was not the usual ETF catalyst but a U.S. Treasury policy to expand purchases of long-term bonds. Treasury Secretary Scott Bessent doubled the size of long-term bond buybacks on Aug. 20 to at least $4 billion from $2 billion per operation, and said in a CNBC interview the next day that the final size could be larger. However, actual fund deployment has not yet begun. The programme is scheduled to run from Sept. 9 to Nov. 4.

The market reaction appeared first in bonds. After weak demand for 30-year debt had pushed long-term rates close to a 20-year high, that trend reversed quickly right after the signal of expanded purchases. The cryptocurrency market also responded. Bitcoin gave up little of its gains even as rates resumed rising on Aug. 21. Traders who had shorted bitcoin in anticipation of tighter financial conditions were forced the other way, and about $3 billion in short positions were liquidated the next day. Forced buying followed and pushed prices higher.

Bitcoin's strength came with a rise in market dominance. Bitcoin rose about 24 percent in a week, marking its strongest weekly gain since 2024, while other cryptocurrencies failed to keep up. CryptoQuant said in its report that bullish indicators turned quickly. Its bull score jumped to 80 from 30 in a week, the highest level since October 2025. Eight of 10 sub-signals also moved into bullish territory.

CryptoQuant said the market had entered the early stage of a 'new bull market' but held back from declaring a confirmed bull market. It said bitcoin needs to close the week above its 365-day moving average, currently around $83,000. LMAX Group strategist Joel Kruger said that if bitcoin breaks above $82,820, the May 2026 peak, some market participants could confirm that the cycle bottom has passed. In that case, it was also mentioned that $100,000 could open up as the next target zone.

The problem is that the rise has been too fast. Funding rates, the cost of maintaining leveraged long positions, rose to the highest level in 20 months this week. This is also a signal that has repeatedly appeared during bitcoin's sharp correction phases over the past two years. It means the rise is relying more on borrowed money than cash.

Profit-taking by whale investors has already begun. CryptoQuant estimated that short-term holding whales realised about $1.2 billion in profits from Aug. 20 to 22. Of that, realised profit on Aug. 20 alone came to $614 million, a record level. Inflows to exchanges also increased to about 53,000 BTC, the most since June. This means more sellable supply has moved to exchanges.

Unrealised returns are also cited as a warning signal. Traders' unrealised returns rose to 20.5 percent. CryptoQuant noted that when this figure reached 19 percent in early May, bitcoin fell about 30 percent. As a result, the market is set to face next week's trading with both strong upside momentum and overheating signals.