The Fear & Greed Index is a tool to help investors and traders analyse Bitcoin and cryptocurrency markets in terms of mood. The Fear and Greed Index for crypto uses social signals and market trends to determine the general mood of the crypto market, which is based on bitcoin and other major cryptocurrencies. Pay attention to the Crypto Fear and Greed Index to find out if you are falling for bitcoins emotions.
Meanwhile, the mood metrics recorded by the Crypto Fear and Greed Index (CFGI) are incredibly low, suggesting extreme fear within the markets. When the Fear and Greed Index is red and near-zero, it signals extreme fear, and may suggest many bitcoin ($BTC) and cryptocurrency investors are overly worried that the price will fall even lower. A lower index means that fear is higher in the market, whereas a higher index indicates greed is starting to run rampant.
To put that into perspective, this index runs from 0-100, with 0 meaning extreme fear and 100 meaning extreme greed. As you can see, the index usually stays within the greed range, rarely dropping into extreme fear for longer than one month.
The opposite is true too, so when the fear-greed index signals that market participants are being extreme greedy, that may be an indication that Bitcoins price is overly high relative to its intrinsic value, and that this might be a good time to sell. The usage is based on the logic that extreme fear will drive the stock price down to its fair value, whereas extreme greed will do just the opposite.
A market filled with panic sellers and extreme fear is bound to see cheaper assets than a market filled with extreme greed, which is at the higher end of the CFGI spectrum. If a market is inches away from reaching 100, it simply indicates that an overvalued market is being driven by greedy investors.
It is possible there is some fundamental news changing market sentiment, and that price actions are not driving the sentiment. There is never one answer as to why markets do what they do, why stocks go up and down, or why investors mood changes from one day to another.
Before jumping in the markets with panic, you are going to want to think about why you are trading cryptocurrency in the first place. The cryptocurrency markets downturn might make you feel shaken, but use this as a wake-up call to revisit why you got involved with the market to begin with. Bitcoin has been trending mostly in a zone of fear since early this year, but recent down-movements have sent crypto markets into an acute panic mode.
That said, Bitcoin does indeed tend to track both price and sentiment across the wider cryptocurrency markets, so there is value to bitcoin even if you are not invested in BTC. It also shows us how bitcoin sentiment has been linked to the big events of crypto in the last couple years. While this indicator may be useful for explaining general sentiments within the crypto markets, it needs to be taken with a fairly liberal grain of salt.
This metric analyzes and measures emotions and sentiments about bitcoin and other major cryptos, drawn from various sources. This metric is measured on daily, weekly, monthly, and annual timeframes, and it can be used to assess whether a security is priced appropriately. Currently, the index uses volatility, market momentum combined with volume, social media, prevalence, and trends to determine a valuation.
Market momentum/volume takes Bitcoins current volume and momentum, compares them with 30 day and 90 day averages, then aggregates the results. Each data point is valued equally with the previous day, in order to display significant improvement of the sentiment shift in Bitcoin markets. We analyzed current sentiment in Bitcoin markets and distilled these numbers down into a simple 0-100 scale.
First off, the Fear & Greed index is specific to Bitcoin (we will soon be offering a separate index for larger alt coins), as much of this is volatility in the coins price. This is particularly true when using the Fear & Greed Index together with other tools which utilize varying data inputs from Bitcoin markets and crypto markets, several of which are found here. Understanding the scores of The Fear and Greed Index may provide the insightful investor with the ability to buy when the market is excessively fearful, and to sell when the market is exceedingly greedy.
That said, it is worth being careful using this indicator to time the market – many wise investors caution against this. When looking at the asymmetrical relationship between panic indexes (PIndex) and bitcoin (BTC); it appears a single positive shock in a panic index causes a negative shock on the crypto-currency bitcoin. In other words, an increase in the panic index (Pindex) is leading to decreases in Bitcoin, Ethereum, and Ripple cryptoasset values.
Based on these results, we determined that there is no long-term cointegration relation between Panic Index (PIndex) and Bitcoin (BTC) Etherium (ETH). In this study, the association between Panic index (PIndex) and Bitcoin was investigated during the early timeframe of Covid-19 pandemic. The association between Panic index (PIndex) and Bitcoin (BTC) was investigated using the asymmetric causality test of Ardl and Hatemi-J.
