For many people, the price of cryptocurrency is irrelevant, because its success depends not on its value, but on its impact on people's lives in various countries. However, cryptocurrency can be called a great investment for traders. The trick is to know what to do when uncertainty is everywhere. Whether the price is rising or falling, volatility will make it interesting for novices to make wise decisions. Fortunately, there are some tools that can help you make decisions. One of them is the fear and greed index. So, what is the cryptocurrency fear and greed index? Next, let's have a look.

What is Cryptocurrency Fear and Greed Index?

The Crypto Fear and Greed Index is a quantitative indicator that reflects everyone's current sentiment towards the crypto currency market. High and low asset values can be described as the impact of rising market fear or greed. The increase of greed will represent higher requirements and further increase the price of Bitcoin. Or, the increase of fear will be reflected in the decrease of demand and significance, which should be the best time to buy Bitcoin.

Cryptographic Fear and Greed Index

Reading cryptophobia and greed indices is easy. If the scale reaches 80 or higher (extremely greedy), it means that the attitude towards cryptocurrency is positive. The market sees a lot of greedy consumption, which is the best time to sell. Fear increases as the number decreases, approaching zero. Because with the low demand and low price in these stages, many people think that the extremely fearful stage is the best opportunity to purchase BTC.

Index calculation method:

1. Volatility (25%)

This takes into account the price changes of cryptocurrencies over time, taking 30 day and 90 day averages. These mean values are used to enable users to deeply analyze the current volatility of the market and the maximum pullback and behavior related to the mean value. The increase of volatility is related to the increase of fear in cryptocurrency market.

2. Market demand (25%)

Similarly, 30 day and 90 day averages will be used here to measure market momentum. Here, the market momentum is combined with the market turnover to describe the rising or greedy level of the market at that time. The value increase here will describe the increase in the volatility of the rising market.

3. Social networking (15%)

This section focuses on the use of Twitter posts and the availability of forum website data such as Reddit. Consider the number of posts and topic tags around BTC and other cryptocurrencies. Post participation is also considered here, because it shows how fast the cell can digest and transmit all these data. Promotion announcement and participation will describe the increase of market greed.

4. Research (15%)

Weekly public opinion surveys are helpful for analysts to observe and understand the market. In this way, the first hand experience of traders is combined with their insight, so that analysts can accurately grasp how the community views the market. Naturally, as a large number of respondents participate in the survey, the accuracy will be improved.

5. Dominance (10%)

The dominant position of currency, in our case BTC, is measured by the market value compared with other currencies. Here, we must consider how to consider BTC as a security investment in the community.

The analysis of this part is twofold; The improvement of BTC's dominant position may describe a terrible market. After all, there is less and less money circulating in counterfeit coins. Or, the decline in dominance may indicate that the market is greedy, because people are willing to take a lot of risks in counterfeit coins.

6. Trend (10%)

Naturally, trends will play a role in the index. Google Trends is a good tool because it shows the search volume of queries involving BTC or other cryptocurrencies. You can optimize your search terms to check the rise of Bitcoin market, Ethereum price forecast, etc. A little non specificity is required here. You can judge encryption fear and greed according to the improvement of corresponding search terms.

What is the correlation between fear and greed?

Cryptocurrency market is an industry full of emotions, usually fear and greed. The regular peak of sentiment translates into the performance of investor sentiment and behavior. These emotional triggers may be as large as national financial statements, or as insignificant as individual social network posts. The impact may flow to the whole market, or it may be limited to a few properties in the market.

Investors will become greedy when predicting the beneficial market standards, but they will be afraid when the universal standards are bad for the encryption market. Fear of missing (FOMO) depends on the positive events around the market and the intensity of speculation. Investors rush into the market to buy promising properties and hold them in order to obtain more profits. In this case, consumption power overwhelms sales.

When the market seems to be going into a deep slump, the situation is just the opposite. Influenced by market sentiment, investors are prone to panic selling or panic buying.

According to the fear and greed index, investors can understand the views of other investors on the market and make decisions with the information obtained from the data. However, personal decisions may vary. Although some investors follow the market, others may decide to "become greedy when others are worried". Even so, the fear and greed index optimizes this process and saves investors the resources they need to carry out this research independently.

Speaking of this, I believe you have a certain understanding of cryptocurrency fear and greed index. In general, the Cryptophobia and Greed Index is a useful tool to understand the public sentiment, which can help you prevent trading based on a simple mentality. In a market where even the most experienced traders are confused, there is no better information.