The fear and greed index measures the sentiment of the market.
Even though it is entirely based on emotions, which is something some people would say has nothing to do with investing, it is actually even more important than most technical indicators.
The fear and greed index is measured using certain a combination of black-and-white, tangible data and emotion-driver data.
Market volume, volatility, social media, dominance and surveys.
Each trend indicates a certain level of greed or fear.
Higher volatility indicates higher fear, whereas higher buy volume imply higher greed.
Then we’ve got Bitcoin dominance, the higher it is the more fear there is in the market.
Last but not least, surveys and social media.
Are people bullish or bearish? Excited or scared?
When the market hits peak fear, people tend to sell or hold on to what they have.
When the market hits peak greed, people tend to buy, and aren’t afraid to diversify in assets that are more risky.
I’ve crossposted this article on Publish0x.
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