<div class="text-justify">Hello dear friends.

As we all know very well the cryptocurrency market is very emotional, when we see an uptrend we get desperate to buy, and when we see a major drop fear takes over and we rush to sell, as if trying to reach the last lifeboat. These trigger simple actions in the market, fear and greed, and both influence our financial decisions.

![](https://i.postimg.cc/25FRPC1N/miedocodicia-1.jpg)
**_The cryptocurrency market moves between fear and greed. Source: edited image, original from [pixabay.com](https://pixabay.com/es/photos/comercio-an%c3%a1lisis-forex-tabla-643723/)._**

## And what is the fear and greed index?
This index is an indicator that expresses the sentiment of the cryptocurrency market, and is very easy to interpret, it is shown as a speedometer whose needle moves between the values of 0 and 100, with higher values being indicative of greed taking over the market and buyers abounding, while lower values are a reflection of investors' fear and their predisposition to sell.

![](https://i.postimg.cc/vHHrnhrr/miedocodicia-2.jpg)
**_General scheme of the indicator. Source: Powerpoint image._**

The indicator was designed by the analyst firm Alternative. me, and is currently only available for Bitcoin, however it is useful as a benchmark of overall crypto market sentiment, and is calculated by weighting different factors such as: volatility (25%), an unusual increase in volatility is estimated to be synonymous with a fear-driven market; current volume and market momentum (25%), basically concluding that high buying volumes in a rising market is synonymous with a very greedy market; Bitcoin dominance (10%) is another factor measured, as an increase in dominance could be caused by increased fear of the altcoin market, conversely, a decrease in dominance suggests that people are becoming more daring with altcoins.

Other less technical factors are also included such as social media interaction (15%), an algorithm is used that records twitter interaction with certain hashtags, and focus on measuring an unusually high rate of interest in a cryptocurrency; surveys (15%), although currently on pause, at the beginning of their studies they conducted surveys to a certain number of crypto-investors to get a picture of market sentiment, and trending (10%) on Google, they extract data from Google Trends for certain searches, for example, if there is an increase in the query "Bitcoin price manipulation) it is taken as a sign of fear in the market.

## The fear and greed index is the lowest today
According to Alternative.me data, the index stands at 11 today, which places the overall sentiment at extreme fear.

![](https://i.postimg.cc/3RvbVv3w/miedocodicia-3.jpg)
**_Fear and greed index for bitcoin. Source: screenshot taken from [Alternative.me](https://alternative.me/crypto/fear-and-greed-index/)._**

If we review the monthly chart of this indicator, we can observe that it has been close to this value during the last month, reaching the lowest value (8) on May 17, which would correspond with the continued fall that the main cryptocurrencies have experienced the last few months and the collapse of Terra.


![](https://i.postimg.cc/hjQT08c2/miedocodicia-4.jpg)
**_Index values over the last three months. Source: screenshot taken from [Alternative.me](https://alternative.me/crypto/fear-and-greed-index/)._**

And if we review the entire history available for this indicator, we can observe that it has been below 10 on a few occasions, such as in March 2020 after the BTC flash crash occurred that caused a 15% price plunge in one weekend, August 2019 when the BTC price fell from its high of that year to around $9000, or as in February 2018, a month before the bear market started that put an end to the bull run of 2017.

![](https://i.postimg.cc/W48Tfxb3/miedocodicia-5.jpg)
**_Times that the fear and greed index has had values below 10 in its history.. Source: screenshot taken from [Alternative.me](https://alternative.me/crypto/fear-and-greed-index/)._**

So the stocks we have seen during this last month are scarce stocks, which have appeared at important lows in the price of Bitcoin or in prolonged falls; and which in the past have been supervened by new bullish cycles.

Although it is not a financial indicator like those we are used to include in the technical analysis of the market, essentially it can serve as a guide to guide our emotions and not get carried away by the general market sentiment, as they say, extremes are dangerous, and it is very good to have a reference when the market is very greedy or very fearful, which is why Warren Buffett's motto is so popular "Be afraid when others are greedy. Be greedy when others are fearful", since, in general, greed and FOMO can lead us to enter late into a market that is about to correct, while nervous selling by others could be an excellent buying opportunity.

However, we must always make a good analysis of the market, an extremely low reading of this index should not be interpreted as an automatic buy signal, we should only take it into account, since, as investors we must be attentive to the opportunities that open the bearish cycles of the market.

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**_Thanks for coming by to read friends, I hope you liked the information. See you next time._**

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