Check Today’s Crypto Fear and Greed index [Updated Daily]
Bitcoin Price V.S. Crypto Fear and Greed index [Updated Daily]
Know More About Fear and Greed index
What is the Crypto Fear and Greed Index? How can we use it in analyzing the investment in Bitcoin?
Factors in calculating the Crypto Fear and Greed
Check Today’s Crypto Fear and Greed index [Updated Daily]
Bitcoin Price V.S. Crypto Fear and Greed index [Updated Daily]
Know More About Fear and Greed index
Has it ever occurred to you that even though you have made a solid investment plan, it can be nonetheless ruined in just a few seconds by the market participant’s panic or greed?
These sentiments in the market can be triggered by a variety of stimuli, for example, the “Fear of missing out” or “FOMO”, as public and private institutions and corporations turn their attention to Bitcoin.
This may cause most investors to have a fear that the price will rise higher than its current level and so they flood the market with their buy orders causing the price to rise in the end.
The fear of getting stuck at buying at such a high price also causes a shift in investors’ sentiment when a group of investors starts to panic and sell their assets along with the negative news that came out during the price decline.
When the sentiments directly affect the price behavior of an asset, how can we measure investor sentiments?
As with the stock market, investors are concerned about holding assets when there is a crisis causing selling pressure to the markets. That is when analysts pick up an index to analyze as a proxy to see the level of panic of investors in the US stock market.
What we described above is the Volatility Index, also known as the VIX Index which takes the trading volume in the derivatives market and uses it to create an index.
This movement in the VIX will be in line with the market sentiments and investment strategies of institutional investors and high net worth investors.
In the crypto market, there is also a similar index that can be used to gauge investor sentiments: the Crypto Fear and Greed Index.
What is the Crypto Fear and Greed Index? How can we use it in analyzing the investment in Bitcoin?
An index is created to measure the greed and fear of investors in the crypto market. It is used to analyse the behavior of investors in the crypto market.
When important events occur in the market, either positive or negative, investors receive news promptly and can make decisions immediately without having to wait for the market to open during business hours.
Now, imagine that the investors around the world receive the news all at the same time. This can cause behavior in the manner of “FOMO buying” or “panic selling” more easily than other investment markets.
When there is a demand influx to buy or sell within this 24/7 market, the Crypto Fear and Greed Index is used to analyze investor behavior to help improve the decision-making process.
Therefore, one is not tied and influenced by the mood of the market which may very well investors better follow their investment plans. A popular example of the index used here comes from the website, alternative.me
The Crypto Fear and Greed Index itself ranges from 0 to 100, where 0 represents the state of extreme fear among investors which may cause strong selling pressure.
The value of 100 has the opposite meaning: investors are getting extremely greedy. There may be some FOMO-induced buying momentum.
The website stated that it has utilized data from 5 sources to formulate the Crypto Fear and Greed Index.
Factors in calculating the Crypto Fear and Greed
When creating an index, it is imperative to note that there is a need for some indexing rules.
At present, only Bitcoin is included in the index. Since Bitcoin is the cryptocurrency that when experienced volatility, will have the largest effect on the market. This fact has also led to other criteria for indexing, including:
- Volatility 25%
Calculated from the volatility and maximum drawdown of Bitcoin’s price, compared to the 30-day and 90-day average volatility. When volatility increases, this shows enthusiasm in the market.
- Market Momentum/Volume 25%
Calculated based on momentum and trading volume like Volatility, by comparing the 30-day and 90-day moving averages when there is a strong volume on the buy side when the market is up. This translates to investors’ greed in the market.
- Social Media 15%
Using Hashtag (#) for each cryptocurrency for analysis. The calculation is done with the rate and number of responses.
- Surveys 15%
Surveys on opinions on the website which is temporarily closed
- Dominance 10%
The percentage of Market Cap. of Bitcoin and Altcoin, looking at Bitcoin as a haven when fears arise in the market and looking at Altcoin for speculating purposes only.
Therefore, looking at the share of Market Cap. can give insights to investors’ sentiment but of course, this is still controversial as the increase of the Altcoin market cap could be due to real interest from investors.
- Trends 10%
Using Google Trends which analyzes keywords related to Bitcoin. If the search count for Bitcoin-related words is increasing, then this is reflected as investors showing an increased interest in the cryptocurrency market.
In summary, measuring investors’ fear and greed in the crypto market can be done using the Crypto Fear and Greed Index. However, this is to only track investors’ sentiments in the market whereas using it for indicating buying and selling signals must be done involving other factors as well.
Now that you understand what the Fear and Greed Index is, you can check out the information and make your next purchase with more confidence. That’s when Zipmex comes in. View the exchange to start trading!
