Fear And Greed: Sentiment Turns Neutral As Bitcoin Stagnates, What To Do?
August 04 2021 - 1:26AM
NEWSBTC
It’s the calm before the storm. What to do when the Fear and Greed
index turns grey? Warren Buffett already told us to be greedy when
others are fearful. We already know that we should be fearful when
others are greedy. What should we do when the market it’s at a rare
state of balance and expectations are high? We should probably take
a page for those Bitcoin maximalists and… wait for it… HODL! One of
the main criticisms that the Fear and Greed Index gets is that it
encourages traders and investors to try to time the market instead
of holding strong. Bad things happen to those who try to time the
market. Yet, we try to do it. The temptation is too strong. Bad
things happen to those who trade emotionally. Yet, some fall for
that trap over and over again. In fact, it could be argued that the
Bitcoin and cryptocurrencies markets are even more emotional than
the traditional ones. And that’s saying a lot. In any case,
before making any rash decisions, we should remember what we’re
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 deal with this constantly. Even though
the Fear and Greed Index is a criticized and questionable
indicator, there’s an undeniable connection to the market that’s
obvious even to the casual observer. When we found a bizarre
correlation between the Fear & Greed Index and UTXO data, we
prefaced it with: “As a speculative asset, nothing else quite
behaves like Bitcoin. Shifts in sentiment take price action to the
extreme. As a result, tools have been developed to monitor the fear
or greed in the market.” The website Alternative.me calculates the
main Fear And Greed Index for cryptocurrency markets, they explain
its reason to be as: The crypto market behaviour is very emotional.
People tend to get greedy when the market is rising which results
in FOMO (Fear of missing out). Also, people often sell their coins
in irrational reaction of seeing red numbers. With our Fear and
Greed Index, we try to save you from your own emotional
overreactions. There are two simple assumptions: Extreme fear can
be a sign that investors are too worried. That could be a buying
opportunity. When Investors are getting too greedy, that means the
market is due for a correction. We, very simply, explained why when
we described how the Fear And Greed Index can be used as a trigger
indicator: “Financial market sentiment can almost always be used as
a contrarian indicator. But in a speculation driven industry where
hype and buzz matter more than fundamentals, this is even more
true.” BTC price chart on Bitstamp | Source: BTC/USD on
TradingView.com What Does It Mean When The Sentiment Turns Neutral
After what seemed like years of coldness and extreme fear, the
market sentiment started improving as early as a week ago. And,
even though it doesn’t feel that way, this advance into neutral
territory is a huge improvement. As Arcane Research said in their
“The Weekly Update” report: “The Fear & Greed Index has climbed
rapidly since late July and touched neutral levels for the first
time since May. Despite the slight decline in the last couple of
days, the market is certainly getting more bullish. This
bullishness is also evident in the futures market.” So, what should
you do now that the sentiment turned neutral? Not much. Keep your
finger on the trigger, though. Things are about to get interesting.
Featured Image by Kristopher Roller on Unsplash - Charts by
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