Bitcoin Fear and Greed Index Signals a Bull Run
Bitcoin fear and greed index helps crypto traders to predict the crypto market based on sentiments or emotions. Being a speculative market, buyers' sentiments drive demand and supply, hence the prices of cryptocurrencies in the market.
Bitcoin has been the benchmark for predicting the altcoin markets for a while now; altcoins likely fall when it falls, and rise, when it does.
Latest indications from the bitcoin fear and greed index show that we are on the verge of another bull run. But being bullish without proper research may lead to terrible losses. In this article, we will analyze how you can take advantage of the index to make informed crypto buying decisions.
What Does the Bitcoin Fear and Greed Index Tell Us?
Bitcoin, still recovering from the market dip in February 2022—keeping the Fear and Greed Index at an “extreme fear” position of 22 at the time—maintained a steady rise up until it jumped to the “greed” mark later in March 2022.
At that point, bitcoin rallied up from 34k to 45k (over 32%), back to a higher low of 38k, and then shot to $47.7K in March 2022. While it is a superb tool for decision-making in crypto trading, critics and skeptics have dismissed it because the fear and greed index promotes market timing.
As a superb tool for decision-making in crypto trading, the fear and greed index puts out values that factor in dynamics like Market Volume/Momentum, Surveys, Dominance, Social Media, Volatility, and Trends.
If the fear is too high, we expect the price of bitcoin to fall, and when greed grows excessively, we expect a rise in prices.
In other words, when fear is the dominant emotion or sentiment, it can signify a good time to purchase bitcoin and other altcoins for the long term. However, if greed is the dominant emotion, it means that investors' FOMO (fear of missing out) is high.
More people will buy bitcoin at this price, driving it to the moon. Eventually, whales and early buyers will sell-off during this period leading to a drastic price crash.
Using the Fear and Greed Index to Your Advantage
The fear and greed index operates on a scale of 0—100. Range 0–25 shows extreme fear in the market, signaling a massive sell-off and a potential dip. This range presents you with a buying opportunity because investors are worried.
25–49 shows that traders will likely sell their holdings due to market influence or trends, and a dip is still certain. 50-55 means that the market rush or sentiment is likely neutral, and traders are still uncertain about potential price directions.
Range 55-75 means greed has set in. This is not a good time to buy. You may simply hold or sell-off at this point to break even.
76-100 shows potentially extreme greed that could erupt in the bitcoin market, as we saw in November 2021 when Bitcoin reached an all-time high of over $68K. Selling at this point may be your best shot at raking in good profit.
While the bitcoin fear and greed index has shown some levels of reliability over the years, it is always important to do your research before buying or selling any digital asset.
