All markets are managed by people. And investors manage their money based on the conclusions they draw from how sectors behave. News, statistical analysis, specialized reports, among others.
The crypto sector is arguably the most unpredictable investment market in the world and the emotions of small and large investors can change very quickly. As a result, the Bitcoin Fear and Greed Index was created to represent, in an easy way, how crypto investors are feeling about the ecosystem. Let’s see more about this indicator.
What is The Bitcoin Fear and Greed Index?
Nowadays, the Bitcoin Fear and Greed Index is a visual way how crypto investors to analyze emotions from different sources and summarize them into one number. This indicator was made by the alternative.me website and is updated daily.
Bitcoin Fear and Greed Index is 28. Fear
Current price: $20,267 pic.twitter.com/xwURZvpHVJ
— Bitcoin Fear and Greed Index (@BitcoinFear) September 15, 2022
Bitcoin Fear and Greed Index Historical Data
On its website, you can see historical data for 1 year and you can watch data in a statistic chart. You can click on any red button and you’ll automatically have an uploaded chart. In the picture below, you can see the 1-year historical data.
One of the reasons that make this indicator very important is that it can represent bear and bull market swings. You can see that until November 2021, this indicator was in 70-80 (Bull market), and from that moment until now, it was between 20-30 on average.
Source: Crypto Fear & Greed Index
How is the Bitcoin Fear and Greed Index Calculated?
The information from the Bitcoin Fear and Greed Index is extracted from five different sources, but one of them is currently paused: Surveys.
a) Bitcoin: We consider bitcoin’s volatility and compare it with the average values from the last 30/90 days. Is an indication of a scary market.
b) Market Momentum/Volume: This source measures the current volume and market momentum in comparison with the last 30/90 days.
c) Social Media: This indicator is currently experimenting with important keywords. In Twitter, this source considers a variety of hashtags for different cryptos and analyzes how they interact.
d) Dominance: This source considers that the rise in bitcoin dominance is because of the fear level of speculative crypto investments. However, when bitcoin’s dominance decreases, people are getting covetous by investing in high-risk altcoins.
e) Trends: This indicator considers data from Google Trends for recommended search volumes.
The crypto market behaviour is very emotional. People tend to get greedy when the market is rising which results in FOMO
Also, people often sell their coins in irrational reaction of seeing red numbers. We try to save you from your own emotional overreactions.
— ⚪Bitcoin Fear and Greed Index (@fearandgreedex) September 16, 2021
How to Read the Fear and Greed Index?
The fear and greed index tool has basically two types of trends:
- A Red Zone: When the indicator handle is further to the left, the value is lower. This means that the sector is more nervous about low cryptocurrency prices. In other words, everyone is thinking about selling.
- A Green Zone: When the indicator handle is further to the right, the value is higher. This means that the sector is optimistic about high cryptocurrency prices. In other words, everyone is thinking about buying.
Wednesday, Sept. 14, 2022#BTC current price: $20,368
🔸Fear & Greed: 27 (-7 vs D-1) – Fear
🔔Turn on notifications for daily update pic.twitter.com/6QySFeZWnX
— ⚪Bitcoin Fear and Greed Index (@fearandgreedex) September 14, 2022
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