This is the calm before the storm. What to do when the fear and greed index turns gray? Warren Buffett has told us to be greedy when others are fearful. We already know that when others are greedy, we should be afraid. What should we do when the market is in a rare state of equilibrium and expectations are high? We should probably write a page for those Bitcoin supremacists and… wait… HODL!
One of the main criticisms of the Fear and Greed Index is that it encourages traders and investors to try to seize market opportunities instead of staying strong. Those who try to seize the market opportunity will encounter bad things. However, we try to do this. The temptation is too strong. Those who trade emotionally will encounter bad things. However, some people fall into this trap time and time again. In fact, it can be said that the Bitcoin and cryptocurrency markets are more emotional than traditional markets. This says a lot.
In any case, before making any hasty decisions, we should remember what we are talking about here.
The Fear & Greed Index goes into neutral territory | Source: Arcane Research
What exactly is the Fear and Greed Index?
We at NewsBTC have been dealing with this issue. Although the Fear and Greed Index is an indicator that has been criticized and questioned, there is an undeniable connection between it and the market, even for casual observers.When we found The strange correlation between the Fear and Greed Index and UTXO Data, we use:
“As a speculative asset, nothing can perform as well as Bitcoin. The shift in sentiment has brought the price action to its fullest. Therefore, tools have been developed to monitor Fear or greed in the market. “
website Alternative.me calculates the main fear and greed index For the cryptocurrency market, they explained the reason as:
The behavior of the crypto market is very emotional. When the market rises, people tend to become greedy, which leads to FOMO (fear of missing out). In addition, people often sell their coins with an irrational reaction to seeing red numbers. Through our fear and greed index, we try to save you from emotional overreaction. There are two simple assumptions:
Extreme fear may indicate that investors are too worried. This may be a buying opportunity.
When investors become too greedy, it means that the market is about to adjust.
We explained very simply why when we Describes how to use the Fear and Greed Index as a trigger indicator:
“Financial market sentiment can almost always be used as a contrarian indicator. But this is especially true in speculative-driven industries where hype and buzz are more important than fundamentals.”
BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
What does it mean when emotions become neutral
After years of cold and extreme fear, Market sentiment started to improve As early as a week ago. Moreover, even if it does not feel like this, this advancement into the neutral field is a huge improvement. As Arcane Studies in their “Weekly update” Report:
“The Fear and Greed Index has climbed rapidly since the end of July and has reached a neutral level for the first time since May. Although it has fallen slightly in the past few days, the market is definitely getting more bullish. This bullishness is also evident in the futures market.”
So, now that the mood turns to be neutral, what should you do? not much. However, please place your finger on the trigger. Things are about to become interesting.
Featured Image by Kristopher Roller on Unsplash - Charts by TradingView