Investing in cryptocurrencies can be risky as the digital asset market remains more volatile than stable from day to day. However, there are parameters that can be analyzed by those who want to invest in order to place their bets as safely as possible and minimize financial risks. The crypto fear and greed index is one such parameter. The crypto fear and greed index is primarily based on Bitcoin and provides a measure of sorts for overall investor sentiment around the crypto market. The index is automatically updated in real time and can be checked at any time of the day through a simple internet search.
The index is divided between the numbers zero to one hundred. While zero means extreme fear, one hundred is the sign of extreme greed. When the crypto fear and greed index is less than 50 points, it leans towards the fear category. This implies that most crypto investors are selling in the market. Meanwhile, when the index pointer crosses the 50 mark, it indicates the greed sentiment hovering over the crypto sector, making investors want to buy more crypto.
When the crypto market rebounds with gains, greed or buying sentiment is high and when the crypto market struggles with losses, fear or selling sentiment increases. The Fear and Greed Index measures the current volume and momentum of crypto transactions relative to monthly and quarterly averages.
When the point is low on this index, for example below 30, it can be a signal that the crypto price is expected to rise in the coming days. If the index value is high, say close to 90, it could indicate that crypto asset prices could see notable declines in the coming days.
Other factors that contribute to the automated construction of this index include volatility status and social media outlook.
Market analysts often advise new investors to make monitoring the crypto fear and greed index part of their research routine before planning to invest a significant amount of money in crypto assets.
Cryptocurrency is an unregulated digital currency, not legal tender and subject to market risks. The information contained in this article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any kind offered or endorsed by NDTV. NDTV is not responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.