Key points:
- The crypto fear and grees index is in “extreme fear” territory.
- The index acts as a contrary indicator identifying trade opportunities.
- Savvy investors should be buying crypto assets after the recent selloff.
The crypto fear and greed index tracks the emotions and sentiment of crypto investors from across the broader crypto and blockchain industry. The index is compiled by a website known as alternative.me and serves as a crucial indicator of what crypto investors are doing.
Also read: How To Start Trading Crypto – A Beginner's Guide.
The index oscillates between extreme fear and extreme greed measured on a scale from 0 to 100, with zero representing maximum fear and 100 representing maximum greed. The index usually leans towards extreme fear when there is a selloff in the crypto markets and extreme greed when the crypto markets are rising.
The index is currently at 8, which is in the extreme fear zone following the massive rout in the crypto markets that have seen Bitcoin erase all the gains made in 2021. Investors are incredibly bearish on the crypto markets following the Terra Luna crash that led to the loss of almost $50 billion in value locked within the system.
While many crypto investors have seen the value of their investments drop significantly due to the recent selloff, the fear and greed index should be used as a contrary indicator. Investors should buy cryptos when the index is in extreme fear and sell when the indicator reaches extreme greed.
However, buying when everyone else is selling and selling when everyone is buying goes against our human nature since we are herd creatures. Therefore, it is hard to sell your Bitcoin at $60,000 when every talking head says it is headed towards $100,000.
The same applies to buying Bitcoin at $30,000 when many have seen the coin fall from $60,000 in months, and a stablecoin erases billions in crypto wealth. However, you should buy and sell at these extreme levels.
Therefore, given that the fear and greed index is at “extreme fear”, investors have an excellent opportunity to buy the best crypto and blockchain projects at a discount. These are some of the best prices that one can get. However, many will be scared of buying now, fearing further losses.
Those who invest now will have a reason to smile a few months down the line as crypto prices rebound, but the timeline of such a rally is unclear for now. Still, savvy investors will be buying cryptos at current prices.
*This is not investment advice. Always do your due diligence before making investment decisions.