Should Investors Follow the Bitcoin Fear and Greed Index?

Bitcoin investments have come a long way from fringe digital assets into a mainstream opportunity for investors.

As such, the quickness of the emerging opportunity has caught people off-guard and wondering whether it’s too late to jump in.

These questions around bitcoin also relate to the general sentiment surrounding the top cryptocurrency and other leading digital assets.

One measuring tool that has captured the attention of the market when it comes to bitcoin is the Fear and Greed Index, a self-described “multifactorial market sentiment analysis.”

Here the Investing News Network (INN) presents a breakdown of what investors should know about the Fear and Greed Index.

What is the Fear and Greed Index?

The Fear And Greed Index operates under a scale of 0 to 100, with the highest mark indicating a green and positive sentiment while the lower score represents growing fear factors for the at-large market.

When the score is low, it indicates that investors are too worried, resulting in a potential buying opportunity.

Alternatively when confidence is high, according to the index, it may show unrealistic expectations of where the price of bitcoin may be headed, creating a selling opportunity.

The index uses the following five data points as a way to create its daily score update:

  • Volatility
  • Market volume
  • Social media
  • Dominance over other crypto
  • Google Trends results

“This adds a new, unique dimension to the Bitcoin Crypto Fear and Greed Index that allows investors to understand how the Index interacts with price historically,” the website reads.

How can investors use the Fear and Greed Index?

Bitcoin, as well as the most digital assets, have proven to be a volatile investment

“Volatility is a part of this space because it’s still nascent … it’s still betting on the future,” Som Seif, founder and CEO of Purpose Investments, previously told INN.

The executive, whose firm has launched several cryptocurrency funds, said thesis an investor may hold in regards to digital assets has to disassociate from the volatility seen in the market.

The volatility surrounding bitcoin and other coins is heavily influenced by sentiment. The Fear and Greed Index offers investors a way to keep an eye on the sentiment around the premier digital asset.

“Bitcoin volatility is still high,” Noelle Acheson, head of market insights at digital asset broker Genesis, told Bloomberg. “Investors are starting to accept that it’s not a bug, it’s a feature.”

The actual measurement tool will provide investors a chance to take a step back and detach the emotional aspect of an investment when it comes to bitcoin.

“Extreme fear can be a sign that investors are too worried. That could be a buying opportunity,” the index page describes. “When Investors are getting too greedy, that means the market is due for a correction.”

Investor takeaway

Bitcoin investments have attracted a lot of attention in a short time frame. As such, many experts and guidance tools have come to welcome newcomers.

The Fear And Greed Index offers investors a chance to get a live reading of the sentiment surrounding the biggest cryptocurrency in the market.

What investors decide to do with that information can be used in tandem to their investment thesis for digital assets.

Don’t forget to follow us @Inn_Technology for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.


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