With the Crypto Fear Index Rising Should You Invest?

There are three main drivers behind any type of trading market. BigONE believes that whether they are stocks, bonds, precious metals, commodities, or cryptocurrencies they will all be affected by the following three key factors.

Base

The larger macroeconomic conditions within which the market exists provides the shape and context for the market. It’s also true to say that conditions are dynamic and can change quickly or slowly over time. Elections, wars, natural disasters, and economic factors such as inflation, government budget deficits, crazy inflationary money printing, and so on all form part of the mosaic that constitutes the shifting macroeconomics within the market must operate. And remember while stock markets are open for trading on normal business days only, the global crypto market is open 24/7, 365 days a year.

Personnel

The market comprises people, and people often can behave predictably, with a habitual mindset. When each of us engages in the individual behavior of buying, selling, and holding assets, larger behavioral patterns emerge on aggregate scales that reflect these individual behaviors. While no one can predict future market movements perfectly, in comparison analysts are accustomed to using technology that can inform decisions about what will happen next, providing a rational course of action with a good chance of success.

Emotion

Humans are not only driven by habitual thinking but also influenced by emotions. Few people can buy, sell, and hold in an utterly logic-based market. People tend to rely more on their “gut” or pure emotion, especially newer traders. The role of any skepticism in the market and decision-making is significant. The market’s movements are at a macro level irrational a lot of the time.

What is the Crypto Fear and Greed Index?

The Crypto Fear and Greed Index (FGI) was developed based on sentiment market drivers. FGI is a free, user-friendly, interactive data table that provides a daily snapshot of general crypto investment market sentiment based on various dimensions such as market volatility, market volume, social media, dominance, and trends. The FGI system automatically searches the internet for these variables and plugs them into its proprietary algorithmic model, updating the FGI index every 24 hours for market reference.

The daily FGI index will be represented by a numerical scale of 0–100, with a scale of 0–50 representing varying degrees of “fear” and a scale of 50–100 representing different degrees of “greed.” At the time of writing, the FGI is 22, which it defines as “extremely fearful.”

What to do in the face of fear and greed?

BigONE believes that in the face of fear and greed, you should think and invest like Warren Edward Buffett, learning from his investment ethos, “When others are greedy, you will be fearful, and when others are fearful, you will be greedy.” As a result, now is the best time to invest in cryptocurrencies.

In Buffett’s opinion, there is some investment wisdom, as people tend to become greedy when the market rises, leading to FOMO sentiment. Furthermore, when they see red numbers, most investors will sell their cryptocurrencies in an irrational reaction. It should also be noted that FGI is attempting to eliminate emotional overreaction based on the two simple assumptions listed below:

[1] Extreme fear may indicate that investors are overly concerned, meaning that now is an excellent time to buy.

[2] When investors become overly optimistic of overconfident, it indicates that the market should correct.

If you want to make money the old-fashioned way, by “buying low and selling high,” the FGI index is an excellent place to start. Another intriguing feature of the FGI website is the ability for investors to examine historical market data to see how trend lines have changed over time. This is useful for tying trendline movements to specific fundamental and technical events in educating yourself about the market. Another useful tool is LunarCrush which tracks sentiment for any crypto asset using social media and influencer mentions to “distill cryptocurrency mentions across social media into bite-sized, digestible pieces of data.”

Can you rely entirely on FGI for your investments?

FGI is a valuable investment aid, but BigONE believes it should only be used as a reference point. It can provide crypto-asset holders and traders in uncertain times with a more rational baseline with a simple concrete figure to evaluate the crypto asset market. In any case, all investment models should be carefully considered and used only as a guideline, not as the sole basis for purchasing or selling any asset.