What are the differences between crypto fear and greed index? You may have come across a few specific terms such as fear and greed among the investors and traders in the crypto market and may have wondered how exactly these are related to the market behavior.
Typically, these two terms indicate the index that measures the emotional reactions of the participants in the crypto market.
These emotional behaviors often result in notable price swings which are required for every crypto investor and trader to know, if not predict.
These price swings can be judged by the people with the help of the fear and greed index.
However, if you want to know them, first you will need to know the differences between the fear and greed index.
This will make it quite easy for you to know the sentiments and predict the movements of the crypto market.
If you are unaware of these differences, this is the time to know about them and for that, you are surely at the right place.
This article includes the compilation of all the differences between the fear and greed index in crypto.
All these facts and figures are enlisted after thorough research and therefore are very reliable and authentic.
Different data sources are used to collect relevant data to corroborate each fact.
All these facts and knowledge will help you immensely in adjudging and visualizing the meaningful progress or change in the sentiments of the crypto market.
6 Differences Between Crypto Fear and Greed Index
Right from the volatility of the crypto assets to the behavior of the participants in the market, everything is vital for building a perfect crypto trading strategy.
It is for this reason you should know about the fear and greed indices, starting with the differences between them.
Here are a few of the major differences between them for you to know.
When the volatility factor is considered, if there is any extraordinary rise in the index, it indicates a fearful market.
On the other hand, when the volatility is not so significant it indicates the drawdown of crypto prices and indicates greed.
2. Market Momentum
If you consider the market momentum or current volume, if it is quite high then it indicates a bullish or greedy market.
In comparison, if the current volume is low it indicates a low market momentum and a fearful market.
3. Social Media
The reaction in social media also provides some useful data and facts related to the market-related keywords.
If a particular crypto asset in the market garners a lot of posts, comments, different hashtags and a lot of interactions in a quick time it shows the growing interest of people in that particular coin and therefore a greedy market.
On the other hand, low interactions and fewer posts and comments on a particular crypto coin correspond to a fearful market behavior.
The outcomes of different surveys also indicate the market conditions. When the votes received are many in a poll, it shows a greedy market with a growing interest among people on a particular crypto coin.
In comparison, if the polls received are not very high in a survey it indicates a fearful market behavior.
If a particular crypto coin such as Bitcoin is dominant over others available in the market in terms of its market cap, which is a share of the entire crypto market, it may be a result of the fear among the investors.
This results in the reduction of speculative Altcoin investments with people investing more in Bitcoin.
On the other hand, when the dominance of a crypto coin reduces, it indicates that the investors are becoming greedier and are investing in Altcoins that are riskier. This is because the investors dream to make it big in the upcoming Bull Run.
However, if you look at it in the other way around, such behavior shows the bullish or greedy market for the Altcoins and the opposite for Bitcoin.
6. Trends and Searches
The Google Trends data shows the search queries for specific crypto coins and that can also be used for the fear and greed index.
While the search numbers are crunched in, it will indicate the changes in search volumes as well as the popular searches with respect to a particular crypto coin.
If there is a rise in the search query, it indicates the fear in the market. In contrast, if there is a fall in the percentage in search volumes it indicates otherwise.
Which is More Useful – Crypto Fear or Greed Index?
Both fear and greed indices are useful to know about the Bitcoin market as well as the entire crypto market at large very well.
This helps the investors and traders as well as the companies that issue the crypto coins.
As for the traders and investors, these indices help in determining how much to invest or trade with.
On the other hand, as for the companies it helps in determining how exactly they can regulate the supply of coins in the market to stabilize the value and demand of a particular crypto coin.
The need for measuring fear and greed is to adjudge the behavior of the crypto market, which as such is very emotional.
Typically, people tend to invest more when the prices of the crypto assets in the market changes in their favor.
This behavior of the market is in keeping with the natural principle of investments which is called FOMO or Fear of Missing Out.
On the other hand, people also sell off their crypto coins as an irrational reaction to the red numbers seen by them.
With the help of the fear and greed index, investors and traders can save themselves from making such emotional overreactions which often leads to drastic and unfavorable results.
The fear and greed index helps people in making two specific assumptions namely:
- When the investors experience extreme fear it could be a sign of a good buying opportunity due to their worries.
- On the other hand, when they become too greedy it is considered to be a high time for a correction in the market.
These assumptions further help in analyzing the existing market and its sentiments by crunching in a few numbers on a scale between 0 and 100.
When the indicator points to 0, it indicates extreme fear and when it points towards 100, it signifies extreme greed.
However, the indicator may not always be in the extremes. In fact, the actual reading of the scale is as follows:
- Anything between 0 to 24 indicates extreme fear in the market
- Anything between 25 and 49 indicates fear
- If the reading is 50 it indicates it is a neutral market
- Anything between 51 and 74 indicates greed and
- Anything over and above 75 indicates extreme greed.
Therefore, when you want to do well in the crypto market and reap all of the advantages it offers to the maximum, make sure that you take a look at the greed and fear index first to know the sentiment of the market and then make an investment.
You will be able to know a lot more about the price swings and the sentiment of the crypto market when you analyze the fear and greed index. However, for that, you will need help from articles like this to know the differences between them.