Bitcoin Fear and Greed Index: Learn how to read the Fear and Greed Index to your advantage

On May 19, the crypto market suffered a crash that hasn't been seen since the 2017 crash. There were many factors that lead to this crash, from Elon Musk bashing Bitcoin on Twitter for days to the news about China banning crypto exchanges and cracking down on miners. All of these and the absolute oversaturation of the bull market where any and every coin was pumping, left the markets in a vulnerable state. As the markets crashed on May 19, many people sold off their investments for fear of losing money. All of this is reflected in the Bitcoin Fear and Greed Index, a software program that tracks the emotional reactions of the Bitcoin markets. Read on to know what is the Bitcoin Fear and Greed Index. 

What is the Bitcoin Fear and Greed Index?

As per their official website, the Bitcoin Fear and Greed Index has been created as a way to help people make rational decisions when Bitcoin and in the extension the crypto markets are behaving irrationally. On their website, the team states that the crypto market behaviour is very emotional. People have a tendency to get greedy when the market is rising and FOMO (Fear of Missing Out) invest in coins for quick profits, which is reflected by the 'Greed' part of the index.

The higher the score on the Index, the higher the greed in the markets. The meter is a 0-100 meter where 0 represents extreme fear and 100 represents extreme fear. When the scores on the index are low - they indicate extreme fear, meaning investors are worried and many people are selling during this time. 

The scores are collected from a variety of sources. The software analyses many variables in creating the score for the Bitcoin Fear and Greed Index. Take a look down below at all the variables used and the percentage of importance given to each, when calculating the Fear and Greed Index. 

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

As of now, since the Bitcoin crash of May 19, which crashed the whole crypto market, the Index has been heavily leaning towards the side of fear. At the time of writing this article, the Bitcoin price stands at $36,732. As of today, the Fear and Greed Index stands at 10 which represents extreme fear in the market. Crypto experts believe this is the right time to invest when the Bitcoin price is low and people are uncertain because when the graph turns high on the greed Index, it means a price correction or a crash is coming. You can take a look at the Bitcoin Fear and Greed Index here. 

IMAGE: BITCOIN FEAR AND GREED INDEX