Bitcoin fear and greed index is showing data in the form of a graph and in the graph, the Crypto market shows its fear and it is Greed. To make this index, different points are calculated such as explosiveness, market capacity and size, social media reports, authority, and power or trends and developments. By crunching all the data, the market organized data in form of numbers and graphs which shows the fear and greed index.
Now many people are unaware of the terms extreme Fear and Greed. When the graph value is at “0 it signifies the “Extreme Fear” and when the value of the graph is at 100, it signifies the “Extreme Greed.” The graph organized in the form of numbers represents the “Extreme Fear” and the “Extreme Greed.” In this article, we will explore more information about the “bitcoin fear and greed index” and if you want to get useful and helpful information about “bitcoin fear and greed index” then read this article from start to end.
Why measure fear and greed
The Crypto market activities are very emotional and sensitive. People are becoming greedy when the market is at its huge rise and purchase or mine more quantity of crypto without understanding the situation and then suffered from the situation FOMO (Fear of missing out). People sell and purchase their crypto by seeing the red numbers. Greed means to want to have more and more. People sell their crypto when the crypto market is at its huge rise and purchase crypto when the crypto market is at its low level.
There are two possibilities:
- Extreme fear is started from zero and when the market is in extreme fear, it means that the financers and the investors are too much worried about buying chances.
- When investors are becoming greedy it means that the market is going on its huge rise and is a correction.
A graph is organized to check the behavior of the crypto market and the graph is simple in meters starting from 0 which means that the extreme fear and ends at 100 which mean that the extreme greed.
Data sources of Bitcoin fear and greed index
For making a graph of the Bitcoin fear and greed index, the data is collected from five major sources, which are mentioned below. Each element has its own importance and the progress of the Bitcoin fear and greed index is dependent on the following five elements. The five elements on which Bitcoin fear and greed index depends are mentioned below:
We have to measure the current volatility. Draw the current values of bitcoin and compare them with the previous thirty days and ninety days. An uncommon rise in volatility represents the fearful condition of the market. Bitcoin fear and greed index graph depends 25% on volatility.
The current size of the market also matters the most in making the index graph. Measure the current condition of market volume, compare it with the average value of the previous 30 and 90 days, and place the results together. When the buying volume on the daily basis rises, we can say that the market is becoming too much greedy. The Bitcoin fear and greed index graph is depending 25% on market volume and size.
When the sentiments and emotional analysis are not working then social media sources such as Twitter analysis is working. On Twitter, we have to gather a huge number of posts with different hashtags for every coin and check how much interest they gained from the people. An uncommon high-interest rate of people means that the market behavior is greedy. The graph depends 15% on social media.
A survey is the better source to measure the greed and fear rate in the market but this source is paused currently.
Strawpoll.com is the major public polling platform by which we are doing polling on a weakly basis and asking people what are their views about the crypto market. Commonly, we can find out 2000-3000 votes on every poll by which we can estimate the current condition of the crypto market and we can make the Bitcoin fear and greed index. However, such types of results cannot get the attention of people too much but it is useful in the starting of studies about the crypto market and index. Bitcoin fear and greed index depends 15% on this source.
The dominance tells the market share of the crypto market. It is useful especially for bitcoin when we are thinking that the increase in a bitcoin dominance, which is caused by the fear then it, is becoming the most save harbor of crypto. However, if the bitcoin dominance decreases, people are becoming greedy and start to invest in more risky alternative coins and want to get a chance in the big Bull Run. If people are investing in alt-coins then it means that the market behavior is becoming greedy. bitcoin fear and greed index depends 10% on dominance.
bitcoin fear and greed index can also be estimated by the Google Trends data. If people are searching about cryptocurrencies on Google, it can also be a source of getting ideas about the Bitcoin fear and greed index. Such as if you are searching Google Trends for Bitcoin, you can get more information about it. However, these days, the rise of search is +1550% on “Bitcoin price management” then it means the market is in fear. bitcoin fear and greed index depends 10% on Google Trends.
Bitcoin fear and greed index market momentum
It is useful and helpful to have a deep look at market levels and differentiate it from the past conditions. When the S&P 500 is more than its moving and progressive level of the previous 125 days then it is a sign of positive momentum in the market. However, if the index graph is below this average means that the investors are getting greedy. Bitcoin’s fear and greed index use the momentum as a signal to get the idea about fear and greed in the market.
Market’s Stock Price Strength
Big stocks have a deep sight into the price strength of stock in the market. It is most important to know how many stocks are struggling well and doing well work. This represents the number of stocks on the NYSE by comparing 52 high weeks with the 52 low weeks. When there are more amount of highs than lows, it is a sign of greed in the market. It is very helpful in making the index and it tells the condition of the crypto market whether it is in fear or in greed.
Market’s stock price Scale
The market consists of a large number of stocks and investors are purchasing, selling, and trading them day by day. This measurement is helpful to get a look at the amount or size of shares on the NYSE that is comparing the rise in the number of shares with the fall in the number of shares. When the number is low it means that the market is in fear. bitcoin fear and greed index uses a fall in the volume of trade as a signal of fear in the market.
Put and call Options
Options mean an agreement here, which provides a right to investors to sell and purchase the stock when they want. It is the right of an investor to sell and purchase the stock; index and other financial securities at a decided and fixed price and date. Puts are the option to sell stocks and calls are the options to purchase. When there is an increase in the ratio of puts and calls, it means that the investors are confused. Bitcoin fear and greed index uses this situation as a sign of fear in the market. Put and calls option matters to get an idea about the Bitcoin fear and greed index in the market.
The most popular source of measure of market situation and condition is the CBOE Volatility Index VIX. The VIX measures predictable price variation in the S&P 500 index for more than 30 days. It is lower when there is a positive situation and it increases when the investors are getting fear. Bitcoin fear and greed index uses the high level of market volatility as a sign of fear. Market volatility is also the best source of measuring the fear and greed in the market and it is the best source of getting an idea about the market’s condition.
Safe Haven Demand
Stock is unsafe as compared to bonds because the prices of the stock rise and fall continuously. However, investing in the stock is more beneficial than investing in bonds. Safe Haven Demand represents the comparison between the bond and stock revenues from the previous 20 trading days. However, when an investor is confused then in this situation, bonds are the best option to invest in. Bitcoin fear and greed index uses a rising safe haven demand as a sign of fear.
Junk Bond Demand
A junk bond is riskier than other bonds. Bond revenue decreases when prices up because there are no opportunities to sell the bonds. When the investors purchase the junk bond, the yield falls, and the yield increases when investors are selling. Bitcoin fear and greed index uses junk bond demands as an indication of greed in the market.