Bitcoin, the largest cryptocurrency by market cap, has experienced a price surge for a few weeks now, and it doesn’t show signs of stopping anytime soon. There have been many speculations, notably the news of the Bitcoin ETF being a major determining factor for the price surge. However, let’s closely examine the primary price determining factor: the choices and behavior of Bitcoin traders in relation to the Fear and Greed Index.
Bitcoin Dominance
Firstly, Bitcoin price dominance is a crucial aspect for investors and traders in the crypto market. Why is it important? It provides a comprehensive overview of market behavior and sentiments. Bitcoin Dominance is calculated as follows:
BitcoinMarketCap÷TotalCryptoMarketCapitalizationBitcoinMarketCap÷TotalCryptoMarketCapitalization × 100
As of the time of publishing, Bitcoin’s market cap is $713,511,739,457, and the total market cap is $1,445,013,363,876.
Bitcoin Dominance = (713,511,739,457 ÷ 1,445,013,363,876) × 100 = 49.38%
This means that Bitcoin’s dominance currently sits at 49.38%. This figure is significant because it helps determine market sentiments, especially when considering Altcoins (other coins/tokens that are not Bitcoin).
Read more about the current Bitcoin price here: Market Wrap: Bitcoin Exceeds $37,950 As Ethereum Breaks $2000, Is Bull Market Finally Back?
Fear and Greed Index
Determining the Fear and Greed Index is not always perfectly accurate, as the factors involved include Bitcoin dominance, current market volatility, market volume, social media posts, surveys, Google trends, and others. These factors are assigned a certain weight, usually in percentage. All these factors contribute to how the Fear and Greed Index is calculated. The index considers the above features to create an indicator that shows whether the current market is in a Fear or Greed region. The indicator’s inputs vary, as different companies use different scales to represent their indicators. However, the one shown below is based on four categories:
- 0-24: Extreme Fear
- 25-49: Fear
- 50-74: Greed
- 75-100: Extreme Greed
We are currently at 69, which indicates Greed. Just last week, we were at 68. The rising greed in the current market suggests that investors are looking to invest in Altcoins, hoping for substantial returns on their investments in a short period. Conversely, when in the Fear index, they tend to hold onto what they have and avoid perceived risks. During such times, investors are cautious, avoiding unnecessary risks and holding onto their assets. This could present an opportunity for others. Social media also contributes significantly, influencing some investors.
Looking at the Bitcoin fear and greed chart, it is evident that various factors have influenced the trend from 2018 to date. Indeed, the Fear and Greed Index is directly influenced by the factors listed above, and certain news or events can sway market sentiment. For example, consider the extreme fear in April 2020 during the COVID-19 pandemic, and after the significant Bitcoin bull run in 2021, there was a drop followed by a steep decrease in Bitcoin price due to the Chinese ban on Bitcoin mining. The chart below displays the Fear and Greed Index in Bitcoin trading from 2018 to 2023.
Don’t forget to Do Your Own Research (DYOR) and observe market sentiments. Look out for news and events that could induce extreme fear or extreme greed in the crypto market. Learn about Dollar Cost Averaging (DCA), hold onto coins/tokens with solid use cases and utility, and always check the Fear and Greed Index.
