The Fear and Greed Index for Bitcoin Indicates a Buying Opportunity
All-encompassing dread equates to all-encompassing opportunity.
For a variety of reasons, the larger crypto economy seems to be in disarray.
Cryptocurrency is no stranger to volatility, but this time seems different. The collapse in March 2020 seemed more of a knee-jerk response to governments’ extraordinary COVID-19-fighting actions.
Prices alone demonstrate that the crypto economy has a long way to go before regaining its earlier peaks. And that won’t happen unless Bitcoin (BTC -0.92%) recovers from its present slump.
Identifying the Severity of a bad Market
The Fear and Greed Index, a combination of differentially weighted facts that provides us a perspective on whether there is too much fear or greed in the market, is one approach to assess sentiment surrounding Bitcoin. The index is a number between 0 and 100. Higher amounts are usually described as “greed” and are linked to a bull market. A lower figure indicates “fear” and typically indicates a bear market.
This indicator has shown to be pretty effective at predicting Bitcoin’s future patterns. This is especially true when utilizing a moving average rather than daily readings, which vary a lot. The Fear and Greed Index’s moving average adds perspective to the present market and is less impacted by day-to-day fluctuations.
Fear may Lead to new Possibilities
The Bitcoin Fear and Greed Index’s 90-day moving average reached a fresh low of only 27 on May 24. These levels have only been witnessed a few times before in Bitcoin’s existence. The only other occasion the indicator fell below 25 was during the last lengthy crypto winter in 2018.
While no one wants to see another crypto winter, these indicators imply that market panic is at an all-time high. This does not imply that Bitcoin will suddenly rebound from current levels. In reality, it’s quite possible that this will be a lengthy procedure.
And that’s great news for Bitcoin investors and believers who want to take advantage of decreased pricing. Bitcoin’s price has been hovering around $30,000 for over three weeks. Bitcoin’s current price and terror levels demonstrate how far the cryptocurrency has progressed.
It’s tough not to get caught up in the market’s present bearishness. The present correction is significant, but it should not be misconstrued. Rather of assessing Bitcoin on a short-term basis, investors should consider it in the long run.
Take a step back and consider the wider picture. Bitcoin has repeatedly shown that it is a better cryptocurrency that will last for more than a decade. The Fear and Greed Index’s new lows are interesting, but they don’t convey the entire picture.
Despite his disdain for Bitcoin, Warren Buffett, the legendary investor, reportedly remarked, “Be frightened when others are greedy, and greedy when others are scared.”