We use different sources to estimate the price prediction of cryptocurrencies, one of the indexes we use is the fear and greed index. As of January 11, 2022, the fear and greed index is approximately 21 out of 100, which means Extreme Fear. This index is determined by sources worldwide, such as using polls, surveys and asking people questions about what they think about crypto. If the index shows 0, it means “Extreme Fear” but on the other hand, if it shows 100, it will represent it as “Extreme Greed.” Since Bitcoin’s move shapes the whole market in most cases, this index plays a key role in price predictions.
If the market is in Extreme Fear, investors will start buying more because it is an opportunity. But if the market is too greedy, this will trigger the amount of selling index by investors because they will take their profits. The volatility of the crypto market could transform the market into a fearful place and the fear and greed index will drop dramatically. Most analysts are using this tool to determine where the market is going, and they are trying to estimate the outcome of the market in the future. But we must say that, not always fear and greed index works. There are cases where dumps and pumps, related to the news or other scenarios, make the fear and greed index completely useless.
Sincerely, we recommend using this index but consider that this tool should not control your investments. It is always good to be cautious. Use multiple indicators and tools like this, and do not lean on only one tool. Also, if you are a day-trader, always follow the news about cryptocurrencies to have an idea about the market.