Bitcoin fear and greed index shows investor emotions

The behavior of the cryptocurrency market depends on many factors, and the emotions of the owners of digital assets — one ofthe most important factors affecting token quotes.

People are often ruled by greed, especially whenthe market is growing. This eventually develops into FOMO (fear of missing out). Or, conversely, investors see the market falling — and rush to get rid of savings, often doing so unreasonably, and go into FUD (fear, uncertainty and doubt).

At the time of writing — this figure is 42, which indicates a lull in the cryptocurrency market.

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What is &#171;Fear &amp; Greed Index&#187;?

Index of fear and greed &#8212; this is the methodmeasuring the sentiment of asset owners in the cryptocurrency market. By analyzing people's emotions and feelings from different sources throughout the day, various online resources, such as Alternative.me, determine a single assessment.

For example, on November 23, 2019, the index valuefell to 17, indicating that the market is driven by an extreme fear of heavy losses. As already understood, extreme fear is characterized by a low score and is a sign of concern. But it can open up great opportunities for traders.

When investors get too greedy (aboutindicates a high score), the market needs a correction, followed by a fall. A value of 0 indicates that the market is driven by extreme fear, and a value of 100 &#8212; extreme greed.

The importance of the index of fear and greed

This indicator is important, because to some extent it is emotions that drive cryptocurrency markets. About this, a RektCapital analyst wrote in a blog post:

&#171;Emotions drive the market.Greed leads to higher prices. Fear reduces it. Human psychology tends to be predictably irrational because many people tend to react the same way in certain contexts.

It is important to be aware of investor sentiment asit determines the best entry into the transaction. When investors are ruled by greed &#8212; you should be careful, and when others are afraid you need to act! Times that involve extreme levels of fear tend to be ideal for those who don't like to buy cryptocurrency during market lulls. Fear lowers the price, while greed, on the contrary, increases it. So when investors are afraid &#8212; greed begins to grow.

At the same time, other market participants mayuse the index of fear and greed for personal gain. By controlling its level, investors can determine the best moments for buying a coin. Times of extreme fear signal rapid growth in the near future, in turn, traders need to act or succumb to fear.

Understanding how people's emotions affect the market,vital for successful trading in the cryptocurrency market. Therefore, the index of fear and greed &#8212; it is a fantastic tool for both new and experienced traders.

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