The crypto market has been skyrocketing lately. But how do you understand when it is the right time to join the revolution? Do you enter when people are fearful about what will happen next? Or do you wait until everyone else is running to buy and then jump in? Enter the Bitcoin Fear and Greed Index.
What is The Bitcoin Fear And Greed Index?
Below is the Fear and Greed Index. This adjusts each day to reflect the market. We have embedded a live-adjusting index here so you can come refer to it whenever you need. Bookmark this page for easy access!
CNN Money originally developed the Fear and Greed Index to help measure the emotions that influence the market most: fear and greed. The Bitcoin Fear and Greed Index is measured differently than the traditional one, as it only looks at the crypto market. The index is measured on a daily, weekly, monthly, and yearly basis to see how emotions influence what people are willing to do with their money.
The logic behind the index is to look at overall market sentiment and use that to determine investment habits. In general, when the market is being influenced by “fear,” people are more cautious, invest less, and often sell some of their investments. On the other hand, when the market is being ruled by “greed,” people are more likely to spend and invest more heavily.
Neither end of the spectrum is an “ideal” state. Too much greed can cause people to throw caution to the wind and create a bubble. On the other side of the coin too much fear can result in trades below market value. The value comes with changes in the fear and greed levels. That is what causes prices to fluctuate, creating gains for savvy investors.
How The Index Is Measured
The Bitcoin Fear and Greed Index looks at several different factors to determine where the arrow points. These factors are market momentum, market volatility, social media, dominance, and trends.
Fear And Greed Factors
Market Momentum
Also called Stock Price Momentum – is the capacity for an overarching price trend in the market to sustain itself longer term. This essentially looks at the health and trajectory of the market. Momentum is factored into the greed side of the index.
Market Volatility
Market volatility accounts for a quarter of the index. It looks at the current price of Bitcoin and compares that with recent price trends over the past 30-90 days to see how volatile the market is. Volatility is measured as an indicator of fear in the index.
Social Media
Social media is one of the most influential factors in our lives today – it’s no surprise it influences 15% of the index. This aspect looks at hashtags, topics, engagement, and mentions on a variety of relevant social platforms. These factors are taken into account on the greed side of the spectrum.
Dominance
Dominance looks at Bitcoin’s share of the overall crypto market. The more dominance Bitcoin has, the less other cryptos have. A decrease in Bitcoin dominance indicates growing greed, and factors for 10% of the index.
Trends
Trends account for 10% of the index as well. This looks at trending search terms, volume of Bitcoin-related searches, and overall interest in Bitcoin to see how much greed is trending in the market.
The Bitcoin Fear and Greed Index takes a few other aspects into consideration – including surveys and other mentions – to come up with the number each day.
How To Use the Bitcoin Fear and Greed Index
It is important to remember that the Fear and Greed Index is not an accurate representation of long-term market sentiment. It is better to look at the Fear and Greed index as a daily indicator that can help you with small daily decisions, or to predict when prices may be lower or higher. But make sure to do additional research for longer-term and larger investments.
If you want to use the index, it is best to use it as more of a trend indicator than anything else. What happened to the market last time it was that far in the red? Does high greed lead to rising prices that stay, or do they tend to immediately trend down? Looking at the trends that follow what the fear and greed index says can help you invest in crypto more wisely, and be better at predicting the best times to buy, sell, trade and more.
Market experts created the Bitcoin Fear and Greed Index to help you see how the market is performing, and give you some input on how to invest. If used properly – and taken with a grain of salt – it can become a valuable go-to tool for your crypto arsenal. Make sure to always use a variety of trends and tools to help you make the best investment decision. Having a full tool belt will always keep you more equipped than relying on one tool alone!
Final Notes
Come back to this page any time you want to see what the Bitcoin Fear and Greed Index is at. For more information, visit the Crypto Fear and Greed Index on Alternative! These investors and developers have done an excellent job creating this tool.
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