The Greed and Fear Index exceeded 90 for the first time since February 2021. The last time it was #BTC 69,000, the index was 82.
Fear and greed are market emotions, and the indicators are calculated based on data sources for your reference. Its core purpose is to view market changes in a better and objective manner. Rather than causing irrational trading behavior because price fluctuations bring us bad emotions. Of course, the fear-greed indicator is just one of many indicators. I hope my introduction can enable everyone to navigate the ups and downs of the K-line with ease.#TrendingTopic
What is the greed index?
This is a very simple index that provides a Bitcoin-specific idea of market sentiment. It pulls data from Bitcoin volatility, momentum and volume, Bitcoin dominance, social media and Google Trends.
The Crypto Fear Index is unlike other charts or graphs you typically see on exchanges. It does not measure the price of an asset or the amount bought or sold, but rather captures real-time sentiment in the crypto space, measuring how people are behaving and how they currently feel about the industry.
If people are worried about the future of the crypto market, predicting a bear market trend, the index will point to fear. However, if people expect prices to rise significantly and have a strong positive attitude toward the market, then the index will point to greed. If it is in the middle, then it may indicate neutral thoughts or confusion among traders.
This metric may feel naive or a little strange, but it can really help understand the type of behavior exhibited in an industry. It can also help indicate whether you as a trader should be concerned
Some people use the Cryptophobia Index as a way to compare their beliefs to those of the trading community and then further use it as a way to make informed decisions on their own. Keep in mind that while they may not seem so, financial markets are affected by emotions, so the emotions of those involved should be listened to as they can affect the performance of assets.
There is no specific or completely certain way to take advantage of the Cryptophobia Index, as people integrate them into their plans in different ways. Some people follow real-time cryptocurrency sentiment and act as if everyone else is doing the same thing, while others try to go in the opposite direction. Warren Buffett ("Be fearful when others are greedy and greedy when others are fearful"), which suggests a reverse reading index.
In fact, this type of indicator is highly interpretable, so there are no hard and fast rules on how to use it. However, this does not mean that it is more important or important than other types of technical analysis, as they help capture the social temperature of the cryptocurrency trading world, especially #BTC.😉. sentiment, as the market often follows Bitcoin trend.
What is fear?
To understand how the Crypto Fear Index works, we need to define what exactly fear and greed mean. Let's start with fear. This is the sentiment that occurs when traders worry about the future of the market. This is their concern and uneasiness about the current market situation.
This feeling can be caused by a variety of factors. This could be due to regulatory anxiety, negative press, or technical analysis signals indicating poor performance. This can manifest itself in traders reducing risk by trusting their own deductive and analytical skills.
Crypto Fear Index, whenever this number falls below 50, we enter a market sentiment of fear. Below 20 indicates extreme fear.
What is greed?
The opposite of fear is greed, which is the emotional reaction that occurs when traders are not only confident, but ecstatic about the market. This leads them to make risky bets, hold assets longer than usual, and act as if each day will bring bigger gains and profits than the day before. Overall greed, and any number above 80 indicates extreme greed.
Why measure fear and greed?
Crypto markets behave very emotionally. When markets rise, people tend to become greedy, leading to FOMO (fear of missing out). Additionally, people often sell their coins in an irrational reaction to seeing red numbers. With our Fear and Greed Index, we try to save you from your own emotional overreaction. There are two simple assumptions:
Extreme fear can be a sign that investors are too worried. This could be a buying opportunity.
When investors become too greedy, it means the market should correct.
So we analyzed the current sentiment in the Bitcoin market and ran the numbers into a simple gauge from 0 to 100. Zero represents "extreme fear," while 100 represents "extreme greed."
data source
Data were collected from the following five sources. Each data point has the same value as the previous day to visualize meaningful progression of crypto market sentiment changes.
But let's list all the different factors included in the current index:
Volatility (25%)
Measures Bitcoin’s current volatility and maximum drawdown and compares it to the corresponding averages over the past 30 and 90 days. We believe an unusual rise in volatility is a sign of fear in the market.
Market Momentum/Volume (25%)
Additionally, measure current volume and market momentum (again compared to the average of the last 30/90 days) and put these two values together. Generally speaking, when we see high buying volume in a positive market on a daily basis, we conclude that the market is acting too greedy/bullish.
Social media (15%)
While sentiment analysis is still not present in the live index (still experimenting with some market-related keywords in the text processing algorithm), twitter analysis is still running. There, posts on various hashtags for each coin are collected and counted (public, showing only posts for Bitcoin), and the rate and amount of interactions they receive within a specific time frame are examined). The unusually high interaction rate has led to growing public interest in the coin, which, it appears, corresponds to greedy market behavior.
Survey (15%) is currently on hold
Advantage (10%)
A coin’s dominance is similar to the market cap share of the entire crypto market. For Bitcoin specifically, we believe that the rise in Bitcoin dominance is due to fear of (and therefore reduction in) investment in overly speculative altcoins, as Bitcoin is becoming increasingly a safe haven for cryptocurrencies. On the other hand, when Bitcoin’s dominance shrank, people became greedier by investing in riskier altcoins, dreaming of their chances in the next big bull run. Regardless, analyzing the dominance of coins other than Bitcoin, you could argue the other way around, as more interest in altcoins could lead to bullish/greedy behavior for that particular coin.
Trend (10%)
We pulled Google Trends data for various Bitcoin-related search queries and crunched the numbers, specifically changes in search volume and recommendations for other currently popular searches. For example, if you look at "Bitcoin" in Google Trends, you won't get much information from the search volume. But currently, you can see that there is currently a +1,550% increase in queries for “Bitcoin price manipulation” in the related search query box (as of May 29, 2018). This is clearly a sign of fear in the market, which we use for our index.
We should be grateful for the rapid development of information today, which can bring us the latest and timely information to help us have more ways to reference market changes.
We should give up some useless and fragmented information, because it will make us confused, anxious, and cause internal friction. It is not conducive to making rational trading judgments.
We should insist on being ourselves because life is short. When you leave, who will remember you were here~
