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Index of fear and greed of Bitcoin and other cryptocurrencies

The behavior of most traders in the cryptocurrency market is emotional, that is, the decisions made are not always logical. Many investors tend to sell their assets faster only after seeing the red markers of quotations of digital assets.

Therefore, the developers of the fear and greed index set out to save users from emotional worries and worries. Thanks to this parameter, it is easier to assess the market mood and prepare accordingly. The index has a 100-point systеm, where 0 is a panic in the market (fear), and 100 is complete confidence in the future (greed).

Therefore, today we will talk about the scope of application, the factors that affect the index. Sit back, it will be interesting.

Why is it measured

The stock market, in comparison with the cryptocurrency, is a quiet backwater. Many people do not associate with digital assets due to high volatility (exchange rate fluctuations of up to 30-40% per trading session).

Those who took a risk and invested in Bitcoin, in pursuit of accurate data on the trend movement vector. Therefore, papers, news and user forecasts are studied.

Of course, it is impossible to predict a price reversal 100%, but the Fear Greed Index is a tool that helps to make more rational decisions about opening or closing orders. It is most effective when evaluating Bitcoin, since altcoins are also growing behind the flagship – when the BTC rate is growing, analogues are also getting stronger, and vice versa.

What data is used to determine the fear and greed index?

Any index is based on a certain set of parameters. For the fear and greed index, this is:

  1. Volatility-the current volatility and the maximum price decrease are compared. The average values for one and three months are also taken into account. If a significant surge in quotations is recorded – this indicates the” fear ” of the cryptocurrency market.
  2. Market volume – market volume indicators are measured for a specified time period. If, with positive dynamics, traders behave too actively, that is, bullish, this indicates market greed.
  3. Social networks – a selection of posts with different hashtags is taken from Twitter. The total number is calculated, they are analyzed for a certain time. If the market reacts too actively to the release of a new coin or its updаte, this indicates the desire of traders to put an extra coin in their wallet.
  4. Surveys-index developers in cooperation with the site strawpoll.com weekly surveys are conducted among traders and ask them to express their opinion about the current situation on the crypto market. 2000-3000 people take part, and due to their opinions, preliminary conclusions about the mood in the community are formed.
  5. Dominance is an analog of an organization’s market share. When the dominance of Bitcoin increases, it is said that players choose a safer digital asset to invest in, and do not want to invest in speculative altcoins. If on the contrary, investors are being greedy, that is, the share of Bitcoin falls and is distributed among more risky assets.
  6. Trends-user requests are analyzed through the Google Trends service. The total number of personalized trader requests is taken into account. For example, “BTC price manipulation” has grown by 2-3% in a short period of time. This indicates an increase in the indicator of fear in the market.< / li>

By studying the parameters described above, it is possible to predict the further vector of market movement with a certain degree of probability.

Fear and greed in trading

It is extremely important for a trader to receive information about the likely market reversal in order to prepare for the opening or closing of orders.

The market is considered greedy if the index is more than 51 points. There is a dependence on which the market changes direction after a short or medium-term period of greed. If the index tends to 80 points, then get ready to open a short.

The community is scared when the index is less than 50. If the points gradually decrease to the level of 20, this indicates an extremely negative mood of traders, and you need to prepare for the opening of a long.

What is the index for Bitcoin required for

The fear and greed index for Bitcoin is a measure of dominance in the cryptocurrency market. If the community is scared, it will invest in a stable digital asset, when greed is great, people tend to invest in riskier coins.

Knowing this pattern, it is much easier to adjust your trading strategy and find successful entry points.
< h3>Fear & Gred Index for Other Cryptocurrencies

If the fear index is high, altcoin quotes will fall, as users withdraw their assets and invest them in more reliable projects (Bitcoin). When the market feels good, and investors are confident in themselves, the popularity of other cryptocurrencies also grows.

Fear & amp; Gred Index is a tool for analyzing the mood of traders. Since trading is often intertwined with emotions, you can play on them with the necessary information.

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07.06.2023, 22:37