Fear & Greed Index - Bitcoin
How to profit from understanding the Fear & Greed Index
There are two prevalent emotions within the investment space:
- Fear, and
- Greed
And until recently, there hasn’t been a good method to determine the market sentiment — especially when it comes to these two driving emotions.
That’s where the fear and greed index comes in.
Originally developed for the stock market, the Crypto Fear and Greed index takes into account many different factors that contribute to the overall cryptocurrency market sentiment such as market volatility, market momentum/volume, social media sentiment, Bitcoin dominance, and current market trends.
If you are looking to enter or exit the market or even looking for an indication as to where the market is heading, it’s important to be aware of the market sentiment and that’s where the Fear & Greed Index comes in.
This is especially true within the cryptocurrency market, which is highly emotional and volatile.
What is Today’s Fear and Greed Index?
If you would like to know the Crypto Fear and Greed Index value for Today, taking into account the most current market sentiment, visit the link below:
Where did the Fear and Greed Index Come from?
The online fear and greed index was originally developed on the CNN business website and focused specifically on market sentiment for the stock market.
The CNN Business Fear and Greed Index was created to help investors gauge stock market movements and whether stocks are fairly priced. It’s also based on the theory that excessive fear tends to drive down the price and too much greed pushes the price up.
How is it calculated?
The CNN Business Fear and Greed Index uses seven different indicators that measure an aspect of the stock market behavior. The indicators they use are stock price breadth, put and call options, market momentum, stock price strength, junk bond demand, safe haven demand, and market volatility.
This index weights these individual indicators and then gives a score between 0— 100 with 0 representing maximum fear and 100, signaling maximum greed.
The Crypto Fear and Greed Index
Soon after the CNN Business development of the Fear and Greed Index and its popularity increased, a few web development companies within the crypto space developed their own Fear and Greed Index, specifically for the cryptocurrency market. The (crypto) Fear and greed index referenced here was created by the site alternative.me.
The indicators taken into account to determine this index are market volatility, market momentum/volume, social media sentiment, Bitcoin dominance, and prevailing trends.
These indicators are weighted and tabulated into a score of 1–100, 1 being extreme fear and 100 being extreme greed. To learn more about how this index is determined and the current Fear & Greed index, click here.
How to use the Fear & Greed Index?
There are many benefits to being able to determine the mood (sentiment) of the markets. Since the markets are highly emotional and reactionary (especially crypto), the fear and greed sentiment can offer insight into buying or selling opportunities.
During times of excessive Fear
It’s popular for contrarian investors, during times of high fear to enter the market. This is typically when the market is selling due to fear, prices are low, and can offer an excellent entry point.
During times of excessive Greed
Periods of excessive greed can indicate the top of the market and a reversal in market movement. For the contrarian investor, times of excessive greed, are often seen as the best time to exit a position (or the market as a whole).
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