What is the Bitcoin Fear and Greed Index?

The Bitcoin market fluctuated violently. After reaching a low of 17,618 usdt on June 18, it broke a six-week high on July 31. However, it fell from $24,670 to $23,555 within a few hours.

The crypto market fluctuates violently, and we often see"extreme panic in the market"or"market Expressions like "The greed index is very high" all come from the fear-greed index.

So, what exactly is the fear-greed index? Let’s take a look.

01. About the Fear and Greed Index

What is the Fear and Greed Index?

The Fear and Greed Index is a tool to measure the psychology of the Bitcoin market crowd. This overall feeling of investors towards market conditions is also called market sentiment.

Why fear and greed?

Fear and greed are the two main emotions in human psychology that can affect the behavior of investors. The Bitcoin market is no exception. Therefore, market sentiment awareness is important in helping us decide when to enter or exit the market.

On the surface, investors generally follow the index’s theory that excessive fear tends to drive down the price of Bitcoin, while excessive greed drives up the price.

The hypothesis is that extreme fear will increase selling pressure on Bitcoin, driving the price down and providing investors with buying opportunities. On the other hand, extreme greed drives up demand for Bitcoin, raising the price and providing good selling opportunities.

Accumulate analysis and summarization from multiple data sources to generate a number. This number is measured on a scale from 0 to 100, where 0 represents maximum fear and 100 represents extreme greed.

On a scale of 0 to 100, the index is divided into four basic categories: 0 to 24 = extreme fear, 25 to 49 = fear, 50 to 74 = greed, and 75 to 100 = extreme greed.

Meanwhile, the index pulls data from the following sources to calculate the score:

Volatility: Converts Bitcoin’s current value to its average over the past 30 days and the past 90 days Compare.

Market Trends and Exchange Volume: Market trends and exchange volume for Bitcoin over the past 30 and 90 days.

Social Media Sentiment: What people think about Bitcoin on social media.

Market Share: Bitcoin’s share of the crypto market relative to all other cryptocurrencies (also known as dominance).

Search Trends: Trends in related Bitcoin search terms to determine whether people are expecting a rise or fall.

02. Anti-human investors

However, one type of investor believes that going against the trend (going against this market sentiment) can outperform The market is also called anti-human investors.

Anti-human devotees take action against conformity. When the market sells out of fear, they start to get greedy. When greed prevails and everyone else is buying, contrarian investors will find opportunities to exit the market when prices rise.

03. Is this Greed and Fear Index reliable?

The answer to this question lies in the data. http://Lookintobitcoin.com Gives investors insight into how the index has historically interacted with Bitcoin price.

Historically, the more extreme the feelings about the market, the more likely Bitcoin is to experience a trend reversal.

As shown in the chart above, the index is the best indicator for predicting local tops and bottoms as well as temporal changes in Bitcoin market direction. However, it did not specify at which price point this shift would occur.

One claim made by opponents of this indicator is that it is not a forward-looking tool and could be particularly dangerous if used repeatedly over a short period of time: When market conditions Investors who decide to pull the trigger when signals of extreme fear may enter the market at the beginning of a lengthy bearish period.

If managing your finances were as easy as following popular sentiment, we would probably all be winners. So this index is more effective at predicting broader trends.

However, please be careful not to use just this single metric to make any investment decisions. We should use it in conjunction with other technical, fundamental and on-chain indicators, especially currently in the uncertain macroeconomic environment we are experiencing.

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