There has been a 20% plunge in cryptocurrency prices over the past 72-hours. It caused significant concerns among retail investors and tens to billions of dollars of realized and unrealized losses. In fact, a key measure of investor sentiment – known as the Crypto Fear & Greed Index (FGI) – shows that the cryptocurrency market is currently in a state of “Extreme Fear” per the latest index update as of Sunday night, Dec. 5, pictured below.

FGI is an interactive, free and easy-to use dashboard. It provides daily market sentiment. The FGI uses a range of factors including volatility, market volume, dominance and trends.

Software automatically searches the Internet for updated information and keeps it up to date every 24 hours. Next, it calculates FGI scores for each day and plots them on a 0-100-scale. 50 represents Fear while 50-50 is Greed.

The developers of FGI claim that the cryptocurrency market is highly emotional.

“People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). People often buy their coins to get rid of the fear and greed that comes with seeing red numbers. We created the Fear and Greed Index to help you avoid emotional reactions. Two simple assumptions are:

• Extreme fearThis could be an indicator that investors are becoming too anxious. It could also be an indication that investors are worried. Chance to buy.
• How Investors Are Getting Too greedyThat means that the market is Correction required.

We analyze market sentiment and convert it into an easy meter that can be used to measure the number of buyers. Zero means ‘Extreme Fear,’ while 100 means ‘Extreme Greed.’ “

Another interesting feature of the FGI website is that you can look back historically and see the trend line shifts over time, which can be helpful to correlate the line’s movement with specific fundamental and technical events.

You can look at the timeline over the past seven days, month, three months, year, and the “max” view which dates back to the creation of the FGI in early 2018. The chart below shows the month in question.

You can see the shift from an “Extreme Greed” measure of 84 on Nov. 9 compared to the “Extreme Fear” measure of 16, which was logged yesterday – that 68 point swing occurred within fewer than 30 days. These shifts show the influence emotions have over behavior in crypto investing.

Flipside

• Contrarian investors believe that buying the dip during a downturn in sentiment would be a good time.

What are the reasons to care?

Keep cool during local down periods. Despite the temporary dip, crypto fundamentals remain positive. The macro technical trend remains bullish.

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