Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Crypto Markets are in “Extreme Fear”- Should You Buy Now?

Cryptocurrency Jan 05, 2022 03:30PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Crypto Markets are in “Extreme Fear”- Should You Buy Now?

There are three primary drivers behind any type of market where trading occurs. Whether stocks, bonds, precious metals, commodities, or cryptocurrencies — they’re all impacted by these three factors: fundamentals, technicals, and investor sentiment.

That last variable of sentiment is packed with emotions, irrationality, and fear. Very few people have the discipline and will to buy, sell, and hold in a market based solely on pure logic. People tend to rely on their “gut instincts” or pure emotions. Anyone who doubts the role that emotions play in markets and decision-making need only recall this quote by famous economist John Maynard Keynes, “The markets can remain irrational longer than you can remain solvent.”

It’s because of this third emotionally-driven element of the market that the Crypto Fear and Greed Index (FGI) was created.

The FGI, is a free, easy-to-use, interactive dashboard that provides a daily snapshot of the general crypto market sentiment based on a variety of weighted factors such as: volatility, market volume, social media, dominance, and trends. The software automatically scrapes the internet for these variables, plugs those data into its proprietary algorithm, and updates the FGI every 24 hours.

Once the daily FGI score is calculated, it’s plotted on a 0-100 scale with ratings between 0-50 representing varying degrees of “fear” and 50-100 representing varying degrees of “greed.”

As of this writing, the FGI is ranked at 24 which is within the “extreme fear” range, as seen here.

One of the coolest features of the FGI website is that it has been activate since 2018, and you can change the timespan to track the trendline overtime. That’s useful to compare peaks and valleys with market events and conditions to better inform investing decisions going forward. Here’s the trendline for the past year.

If you’re a fan of Warren Buffett and want to invest the same way he does, now would be the perfect time to get into crypto when you consider his famous contrarian investment quote, “Be fearful when others are greedy and greedy when others are fearful.”

There’s wisdom in that perspective because people tend to get greedy when the market is rising, which results in FOMO (fear of missing out). Also, people often sell their crypto in the irrational reaction to volatility or declines. However, the website states that the FGI seeks to remove emotional overreactions based on these two simple assumptions:

  • Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
  • When investors are getting too greedy, that means the market is due for a correction.
That makes a lot of sense if you want to “buy low” and “sell high” — and isn’t that the general point of investing?

The FGI is a useful tool; however, it’s only a single data point, to help holders and traders alike evaluate the crypto markets with a bit less emotion and a bit more understanding during times of uncertainty. Regardless, all investment models should be considered with a grain of salt and should only be used as another data point to reference — not the sole reason for buying or selling any asset.

EMAIL NEWSLETTER

Join to get the flipside of crypto

Upgrade your inbox and get our DailyCoin editors’ picks 1x a week delivered straight to your inbox.

[contact-form-7] You can always unsubscribe with just 1 click.

Continue reading on DailyCoin

Crypto Markets are in “Extreme Fear”- Should You Buy Now?
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email