What is Crypto Fear and Greed Index, And Here’s Why You Should Keep Tabs on It

Investments in cryptocurrencies could be risky given that the market of digital assets remains more volatile than stable on a day-to-day basis. There, however, are parameters that can be analysed by those looking to invest in order to place their bets as safely as possible, minimising financial risks. The crypto fear and greed index is one such parameter. Primarily based on Bitcoin, the crypto fear and greed index gives a sort of measurement on the 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 marks of zero to hundred. While zero signifies extreme fear, hundred is the mark of extreme greed. When the crypto fear and greed index is less that 50 points, its inclining towards the fear category. This implies most crypto investors in the market are selling. Meanwhile, when the index pointer exceeds the mark of 50, it signifies the greed sentiment hovering over the crypto sector, making investors want to buy more crypto.

When the crypto market is rallying with gains, the greed or buy sentiment is high and when the crypto market is grappling with losses, the fear or sell sentiment picks pace. The fear and greed index measures the present volume and momentum of crypto transactions against monthly and quarterly averages.

When the point is low on this index, say below 30 -- this may signal that the crypto price is expected to increase in the coming days. Likewise, if the index value is high, say close to 90, it could indicate that the prices of crypto assets could see notable dips in the coming days.

Other factors that contribute to the automated compilation of this index includes volatility status as well as 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 hefty amount on any crypto asset.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.