The Crypto Fear & Greed index is at its highest reading since March 2022. While not a perfect index, it has still served as a decent (and somewhat accurate) proxy for market sentiment and overheating.

This rally has been going since early January 2022, and BTC is up 60% from the bottom it set in November 2022. A pullback doesn’t seem very far-fetched, and the signs of overwhelmingly positive sentiment are quite abundant.

The sharper we move up, the sharper the drawdown can be. A rally driven by leverage has the potential to be destructive when that leverage is forced to wind down, culminating in a liquidity cascade. Leverage, coupled with the possibility of a sharp reversal in sentiment if a pullback occurs, could enable a cascade.

That doesn’t mean it’s all over right this minute, but rather a note of caution that we’re getting fairly close to the sun.