Everyone who speculates knows a saying, "When others are fearful, I am greedy; when others are greedy, I am fearful." Does it mean that you can do the opposite by looking at the daily fear and greed target and buy low and sell high? If you do this, you will most likely be repeatedly tortured by the market, doubt yourself, and finally follow the trend to chase the rise and sell the fall.
So what is the correct way to open the Greed Fear Index? Let's take Coinglass's Greed Fear Index as an example (Coinglass's Greed Fear Index is only applicable to Bitcoin, but Bit often affects the direction of the entire market). If you open your phone to check the index, you will find that the market plummeted today. The index has fallen from 87 in the previous two days to 75 for two consecutive days, close to the lowest point in nearly two months. So can we say that the market is very fearful now, and I want to enter the market to buy at the bottom? Let's turn on the computer, log in to the website version of Coinglass, and look at the index trend over a longer period of time. Well, when we look at the trend of the Greed Fear Index from 2019 to now, it can be clearly seen that market sentiment and prices have been running at high levels in the past two months, and today's sentiment is far from real fear. And every time the market reaches this emotional high point in history, it will usher in adjustments. For example, in this adjustment in mid-February 2020, Bitcoin fell from 10226 to 5542. The sentiment index also reached a freezing point from 63, only 8 points, which is the famous 312 incident in the currency circle. Therefore, judging from the emotion, this adjustment does not seem to be in place. Combined with the theory of "go long on the leader and go short on the bear", it seems natural for us to open $ETH for short selling.
When the market continuously declines from the high prices of a bull market, and the Fear and Greed Index lingers below 30 for an extended period (measured in months), the price of BTC is likely near the bottom. For example, during the bear market in 2022, even if the price drops further afterward, there's no need to worry too much. No one can accurately pinpoint the bottom; being at a relatively low point is sufficient. Therefore, it does not seem like a good time to go long. If the price continues to fall and you notice the Fear and Greed Index reaches around 40 or even lower in the last couple of days of the month, then boldly buying the dip on BTC might be a high-expectation operation.
The Fear and Greed Index, like candlestick charts, can be misleading if viewed too closely; only by zooming out and observing from a perspective of several months or even years can one truly grasp market sentiment. This allows you to buy the dip boldly when others are fearful and gradually sell when others are greedy, thereby protecting yourself.
Of course, no market analysis will ever be completely accurate, especially when based on a single indicator. The cryptocurrency market is risky, and investments should be made with caution.