GM Tronics, while flipping through https://coinmarketcap.com/
I came across this which i did some findings so I can share with us. Normally I do see it and ignore so I saw the need today to know more of it.
Although this metric can help show overall sentiment in the crypto markets, it shouldn’t taken as 100% accurate
Be fearful when others are greedy and greedy when others are fearful.”
- What is the Crypto – or Bitcoin – Fear and Greed Index?
The creator of the Crypto Fear & Greed Index, Alternative.me, describes it this way: >“With our Fear and Greed Index, we try to save you from your own emotional overreactions.”
The index analyzes and measures emotions and sentiments for Bitcoin and other large-cap cryptos from various sources.
Alternative.me goes on to explain that its conclusions are based on two simple assumptions: >“People tend to get greedy when the market is rising which results in FOMO (fear of missing out.)
Also, people often sell their coins in irrational reaction of seeing red numbers.”
Which is to say, many investors — those not-smart ones — tend to buy high and sell low. ( Something @Nweke-nature1.com has been doing)
- How the Crypto Fear and Greed Scale Works?
The Crypto Fear & Greed Index runs from 0 to 100. A lower score means there is more fear in the market, while a higher one indicates that greed is starting to run rampant.
**Extreme Fear is defined as a score between 0 and 24 but this is downgraded to Fear between 25 and 49.
As you’d expect, 50 is roughly neutral.
Anywhere between 51 and 74 indicates there’s Greed in the market,
Escalating to Extreme Greed with a score over 75.**
When the index measures Extreme Fear, many market participants are selling, driving down prices, which can make a good buying opportunity — buying the dip. ( What @Prince-Onscolo and @Youngyuppie … Preaching)
When it measures Extreme Greed, FOMO can make for a prime opportunity to take profits by selling at the top of the market. ( What @Nana66419 advocating for)
The Crypto Fear & Greed Index is based (loosely) on CNNMoney’s stock market Fear & Greed Index, and there are lessons to be learned about the potential pitfalls of profit taking versus the value of buy and hold.
- What Does the Crypto Fear and Greed Index Measure?
Let’s back up and focus on what is actually measured by the Crypto Fear & Greed Index.
First of all, it should be noted that despite its name, the Crypto Fear & Greed Index only measures Bitcoin, not the market as a whole
That said, Bitcoin does tend to track both the price and sentiment of the broader crypto market, so it has relevance even if you’re not investing in BTC.
There are five components of the Crypto Fear & Greed Index, according to Alternative.me.
Volatility accounts for 25% of the index. It measures the current price of Bitcoin and compares it with 30 and 90-day averages. The Index uses this as a surrogate for fear in the market.
Market Momentum/Volume also accounting for 25% of the index. This takes Bitcoin’s current trading volume and momentum, comparing it with 30- and 90-day averages and then combining the results. This is taken as a stand-in for too much bullishness or greed in the market.
Social Media takes up 15% of the index. This currently looks at Bitcoin-focused Twitter hashtags, focusing on the speed and number of interactions. A higher-than-normal interaction rate is taken to mean greedy market behavior.
Growing dominance means funds are being pulled from more risky altcoins, on the assumption that Bitcoin is seen as “the safe haven of crypto.”
A decrease in BTC dominance suggests growing greed as represented by investments in riskier coins.
Trends also account for 10%, based on crunching Google Trend data for various Bitcoin-related searches.
You’ll notice that adds up to 85%. The Crypto Fear & Greed Index initially used surveys for the remainder, but those are paused — and have been for quite some time. It’s not entirely clear how the other percentages are affected.
- My point of view about BITCOIN FEAR AND GREED INDEX?
While the Crypto Fear & Greed Index is definitely a useful tool for getting a grasp on market sentiment, it can be easy to read too much into it by itself.
Volatility of Bitcoin can lead to very sharp but very brief changes in the Index. Which is another way of saying, remember to DYOR — do your own research ( What @manfred_jr and @Okorie doing currently)