The Fear and Greed Index, developed by Alternative.me Software, measures the emotions of investors on a daily, weekly, monthly, and yearly basis. Too much fear drives the prices low, greed increases the prices. The index serves as a tool for making sound investments.
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By watching this index, we find if investors are pursuing high risk strategies or rotating investments from one asset to another. If used properly, the Fear and Greed Index can be used as a guide for making profitable investments in Bitcoin.
Traders use the Bitcoin Fear and Greed Index to determine the best time to enter/exit a trade; time buying/selling of dips, and watching undervalued assets. When fear is high, it is a good time to add to your portfolio. The index also helps to determine short term gains.
Some crypto skeptics have dismissed the Bitcoin Fear and Greed Index as an investment tool that isn’t sound. However, it is a barometer for predicting the market-timing of Bitcoin. It acts like an alarm when fear is at its peak, this happened once immediately after the 2017 bull run and irrational anxiety guided the actions of most traders.
There are several opportunities to buy Bitcoin during extreme fear and selling opportunities when there are spikes of greed. This goes on with much precision and increased moderation during times of high volatility.
Technical analysts use the index to watch out for strong buy, strong sell sentiment and accumulate altcoins that will possibly gain within a 4 to 8 week period. This helps traders turn huge profits, provided that they stay invested for the long haul. By definition, the cryptocurrency market is driven by demand and supply, it depends on tokenomics – the coin’s inflation, its supply, halving and circulation. However, fear and greed drives a lot more investment in and out of the market, than anything else.
When it comes to investing in Bitcoin, there are really only two ways to go:
The first is based on statistics and technical analysis, such as the price-to-earnings ratio, and whether a token is undervalued, or priced right.
The second way is to follow the analysis of others. Most traders prefer to mix both styles, follow the analysis of expert traders and read the Bitcoin Fear and Greed Index to make your own investment decisions.
Naturally, there is fear without planning, strategy and timely execution but with a detailed analysis, it it’s easy to make investment decisions based on this.
Bitcoin is currently trading at $7,330. Two days ago it dipped to a low of $7,199. According to popular crypto analyst CryptoFibonacci, resistance and support is falling to the wedge. If the price doesn’t cross above $7,400 soon, the bears may get a chance to bring down the price to a new low, perhaps the $5,400 level.
The fear and greed index indicates a fear around 40, which is on the higher side. The daily scale is positive and well above SMA-200. There is strong resistance before the bulls would stage a complete take over. The market is bullish. Are you?
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