Bitcoin fear and greed index measure the crypto marketing sentiment. Its mechanism is to collect the data from different sources for generating into one number which is ‘0’. This ‘0’ is mentioned on a scale i.e., from ‘0 to 100’. If the data is resulted as ‘0’ then it is known as “extreme fear” and if the data is resulted as ‘100’ then it is known as “extreme greed” in the market.
The Bitcoin fear and Greed index are calculated by the computer, it measures the values for an equal weight by using the seven indicators. The results get upside down because, if data has resulted with too much fear, then stocks get sink below the intrinsic value whereas; if the result is greedy stocks can be bid up far away according to the worth price.
Bitcoin fear and greed index are traded on cryptocurrency. Fear and greed are considered by the crypto traders, they follow the chart of price accordingly when the price gets increased very high crypto traders become greedy while when the price decreases traders change to fear. This swap is maintained under the index chart in both directions.
In comparison “extreme greed” shows a little reward on the chart with a growing threat on holding the budget price levels. Whereas; “extreme fear” shows a reward ratio of good risk on low prices in the chart.
Current Index for Bitcoin Fear and Greed Index
The measures are covered up with 100 percent in variant ways:
- Market volume (25%): This measures the current momentum on average values of the last 30 to 90 days, high buying momentums are up drifting the signals on the daily basis
- Volatility (25%): It measures the present volatility rate and withdraws the bitcoin on comparison of average values of the last 30 to 90 days. If the volatility is raised unusually then it gives a sign of fear.
- Surveys (15%): Surveys are conducted on the traders and individual people with crypto polls to see the marketing of Bitcoin.
- Social media (15%): Bitcoin hashtags were counted to calculate the popularity and understanding level among the public.
- Trends (10%): Trends are used in google data to calculate the number of searches related to Bitcoin trading and changing of volumes.
- Dominance (10%): Bitcoin dominance is based on fear, when the dominance gets shrink traders will be getting ready for being greedy about buying altcoins. Dominance level should be analyzed to know the crypto marketing.
- Bitcoin fear and greed index is calculated on the daily basis to analyze the emotions into a simple number from different sources. Measures are calculated under two possible ways those are
- Buying opportunity
- Due to a correction
Fear and Greed run on human psychology because the two assumptions are taken to predict irrationality according to the contexts. In predicting the price move technical analysis was initiated on the tools of past marketing data and volume/momentum. To maintain the stability of crypto marketing a philosophy should be followed up by the traders that “Be greedy on fear times and get Fear on greedy times”. If it could be hard to follow the consistency then tune up into the investor’s mind to learn how to be!
The inclination of fear and greed index
According to the calculated data in recent terms, fear gains momentum very quickly and gets spirals uncontrollably. At every aspect fear and greed comes close to the point ‘10’ and reverses the index values upside down. “Bargain hunters” use the climate of fear and make themselves advantageous. When the marketing is on process fear and greed index should give you a result on buying and selling the Bitcoin.
How Bitcoin fear and Greed index measured?
Fear and greed are measured under 7 factors:
- Stock price strength: analyses the number of stocks hitting high and low.
- Stock price breadth: shows the declining volumes in advancement.
- Stock price momentum: compares the high-hitting stocks with low-hitting stocks.
- Set and call options: signifies the fear and greed under set and call options.
- Market volatility: compares the market rate with real-time expectations in the market and then calculates the index signals on increasing and decreasing.
- Junk bond demand: this factor measure the greed rate of a trader under the principle that investing high rates in the market.
- Safe-haven demand: this factor is more like a safe locker for any assets and treasures of traders. It measures the adopted value of the storage money on investors or traders.
- According to the factors mentioned above investors and traders establishes the fear and greed index to maintain stability. The terms fear and greedy comes from the “traditional stock market”. In the stock market greed, fear, and herd mentality are classified as primary emotions. These emotions affect or gets a lead in bear markets, bull markets, and business cycles.
- Bollinger bank is used to maintain the right results in cryptocurrency by adopting the three variations and calculating them accordingly. Bollinger’s band is having three variations;
- Upper limit
- Moving average
- Lower limit
“Moving currency” and “MACD” represent the changing line in the data which connects the average of two moving rates.
Cryptocurrency might not have 100 percent accurate results but, a combination of moving averages, Bollinger band, and MACD help to get the result accurate and effective.
Advantages of fear and greed index
This runs under the principle of the logical methodology of traders, this undergoes complicated marketing. This index is proved as a reliable factor and very much essential for beginner traders as well as experienced traders.
Disadvantages/drawbacks of fear and greed index
This index doesn’t compile the truth, until and unless having control over emotions during marketing keeps you on the safe side elsewhere, keeps you at risk.
Bitcoin fear and greed index is a great signal for calculating the index values and predicting the marketing prices approximately. This had been titled a “valuable tool” for traders and investors. Despite fear/ loss, it is a very efficient way to specify the prices accordingly to the Bitcoin market price. This tool intact helpful insights for Bitcoin marketing. This tool is featured as secure, reliable, and navigable with the maintenance of safe data. If you are planning to invest in Bitcoins, you can open an account in any one of the bitcoin trading platforms and get started.