The law of demand and the law of supply rule all the prices of every product you know. From oil to bread, everything is controlled by these two law in economics. The same happens with Bitcoin, that get’s cheaper when people avoid buying it and gets more expensive when more people try to buy it. But what kind of data can an investor get to know if Bitcoin is being feared by their owners? Or on the other hand, what data can an investor get to know if bitcoin owners are getting greedy and buying it more? That’s called the Fear and Greed Index (FGI) for Bitcoin.
What is Fear and Greed Index?
The FGI for bitcoin is a tool that psychologically measures the intentions of Bitcoin owners, helping investors understand the market and make decisions towards buying or selling their crypto.
It is interesting to see the use of such tool in times of uncertainty:
- in times of extreme fear, investors tend to worry more and sell their crypto, meaning the price will go down and this represents a good opportunity to buy crypto;
- in times of greediness, the market end ups correcting itself, making sure that the value is balanced.
The Fear and Greed Index from Alternative is my favourite and the only one I use since I started investing in crypto a few years ago. They provide a spectrum from 0 (Extreme Fear) to 100 (Extreme Greed) and according to the values I make my own decisions. You can find the tool here or take a look:
If you follow me on Instagram, you might remember my post from May 11th of 2022 where I shared that the value from the FGI for Bitcoin was 12. The price of Bitcoin that day was around $30k. Since then, the price dropped and in the past couple of weeks it has been slowly increasing – just like the FGI!
Please, let me know if you use any tool to help you make decisions regarding your investments and if you do, what tools do you use?
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