The Crypto Fear & Greed Index has been flashing ‘extreme fear’ for the last week following Mar. 12’s sudden market crash.
The Fear & Greed Index serves as an aggregate for investor confidence and attitude towards the market of cryptocurrency. The metric utilizes multiple sources, including social media, to produce a relative number that reflects investor sentiment.
A lower number has historically correlated to more market volatility and ‘fear,’ while a higher number indicates that investors are extending into ‘greed’ territory.
According to the index,
The crypto market behaviour 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 irrational reaction of seeing red numbers.
The crypto markets have been trading in ‘extreme fear’ since Mar. 8, when economic uncertainty from the coronavirus pandemic led to a price depression. Following Mar. 12’s sudden market crash, during which the price of bitcoin dipped below $4000, the index dropped further to its lowest point since August 2019.
The index claims that market sentiment extremes can signal a potential reversal in price. Extreme fear indicates that investors are “too worried,” and could present a buying opportunity, while greed indicates the market is due for a correction.
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