Fear & Greed Index – Separating weak hands from hodlers

Fear & Greed Index – Separating weak hands from hodlers
Technical tools can be a trader’s best friend when used correctly. One such is the Fear & Greed Index that shows traders how fearful or greedy the market is. We take a look at how you can use the Fear & Greed Index to buy low and sell high.

What is the Fear & Greed Index?

The cryptocurrency market is known to be extremely volatile. Whilst this can scare a lot of traders, it also presents the ideal opportunity to profit from its volatility. The word FOMO (Fear Of Missing Out) comes to mind. When the market starts to drop violently, like it frequently does, weak hands will panic sell and may lose money. On the other hand, seasoned traders know that when the market drops, there may be an opportunity to buy low and fill your bags.

This is where the Fear & Greed Index is most useful. The Fear & Greed Index looks like a thermostat that indicates the current market sentiment. The Index measures 0 – 100. When the Index is in the red, or below 50, it means that the market is fearful and that investors are very worried about Bitcoin’s current price. Should the Index show a reading of 50 and up, and be in the green, it means investors are getting greedy.

Check out the Fear & Greed Index.

The Fear & Greed Index only measures Bitcoin and not alternative coins.

Show them what your made of

The Fear & Greed Index works with different data sources to give the most accurate reading aka the changing sentiment of the crypto market. The data is compiled on a daily basis. Herewith a breakdown of the data sources that the Fear & Greed Index makes use of to give accurate readings:

  • Volatility (25%)
  • Market Momentum or Volume (25%)
  • Social Media (15%)
  • Surveys (15%)
  • Dominance (10%)
  • Trends (10%)

How to use the Fear & Greed Index

It’s really simple. Should the Index show that the market is fearful, when the needle is in the red, it is time to buy. When the market is greedy or in the green, it means that the price of Bitcoin may be due for a correction. It may be a good idea to sell your Bitcoin at this stage.

The lowest the Fear & Greed Index has ever been was in late-August 2019 when it hit a mere 5. The price of Bitcoin dropped 11% from around $11 000 to well below $10 000 on 22 August 2019. Historically, it was the lowest the Fear & Greed Index has ever been and the market was extremely fearful that day.

There are many other technical analysis tools and indicators that can assist you to buy Bitcoin at the opportune moment. Be sure to also take a look at the volume and past market data in order to get in as low as possible.

In conclusion, Warren Buffet has become a popular meme in cryptocurrency chat groups with his quote: “Be fearful when others are greedy and greedy when others are fearful.” Baron Rothschild concurs Buffet’s statement by saying: “The time to buy is when there’s blood in the streets.”

When you’ve decided upon the perfect time to buy Bitcoin, be sure to check out AltCoinTrader.

Please Note: This is not financial advice, you should always do you own research.