Look at a bitcoin price chart. What do you see?
Red candles, green candles, volume bars?
Perhaps you’ve trained yourself in TA and you can see the patterns behind the bars. Support, resistance. Trends, ranges.
Or just maybe you see between the lines, the music behind the words. Greed. Elation. Caution. Panic.
Ultimately, a market is the reflection of all of its traders’ decisions, and many of those decisions are driven by emotion – particularly in a market like bitcoin, where institutional players are still just starting to come in.
That’s why Sentiment Analysis is an important tool, alongside Fundamental Analysis and Technical Analysis. What’s the market’s approach to this right now? Are they confident, fearful, interested, averse?
Take a look at The Fear and Greed Index: an analysis of emotion and sentiment taken from different sources and consolidated into a single figure. Zero means Extreme Fear. 100 represents Extreme Greed. You’ll see from the Crypto Fear and Greed Index that fear tends to correlate with buying opportunities, and greed with selling opportunities. It uses volume and volatility, social media and survey data, as well as bitcoin dominance and data from Google Trends.
It’s not a perfect measure, but it’s another useful tool for the smart bitcoiner’s toolkit.
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