Clearly, even without an Index, the crypto sentiment hasn’t been too positive but that hasn’t stopped the digital asset from experiencing a significant bounce. The entire crypto market has been outperforming the traditional stock markets even though the fear index is really high.
The Index has hit a low of 10 points, levels not seen since August 2019 and December 2018 during the Bitcoin crash to $3,000.
How is The Greed and Fear Index Calculated?
The Crypto Fear & Greed Index is measured by analyzing the current sentiment of the Bitcoin market. The Index uses 6 data points, the volatility index, the Market Momentum and Volume, social media analysis, surveys, Bitcoin market dominance, and google trends.
“The crypto market behavior is very emotional. People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). Also, people often sell their coins in the irrational reaction of seeing red numbers.”
According to the Index, extreme fear, although indicates that investors are worried, can be a good buying opportunity.
It’s not exactly clear if this Index can constantly predict whether the market is bound for recovery or a crash. The last time the fear index was this low was back in August 2019 after Bitcoin traded as high as $13,970.
The digital asset was still trading at around $10,000 when the fear index hit below 10. This was NOT a good buying opportunity as the digital asset had a huge drop a few weeks later crashing down to $7,300 and $6,435 a few months later.
The fear index was also overextended back in November 2018 when Bitcoin was plummeting below $4,000. The digital asset dropped as low as $3,156 and saw no significant bounce until April of 2019. It seems that the Index was somewhat good at that time but it doesn’t seem to be too accurate overall.
Still and all, the crypto market is definitely performing well in the past few weeks even though the fear index is still dropping.