Further, a short squeeze is expected as more than $300M shorts have been liquidated.
What does the Fear and Greed Index mean?
The Crypto Fear and Greed Index is an adaptation of the Fear and Greed index of the capital markets and it works almost in an identical manner. There are three conditions possible on the index:
1. Extreme Fear(0-15)
Extreme fear is generally seen when there is panic selling in the market. This commonly happens at the bottom of a bear cycle when investors panic due to a huge fall in prices. This is also seen when there is a piece of bad news. For example, the crash in Bitcoin Prices below $25k on 13 June 2022 was a panic moment as Bitcoin was thought to have strong support around those prices.
Extreme fear also signals that the market is oversold which means that people have sold so much that prices at this point are very attractive to buyers. However, you should only buy at these prices if you have the time to hold till markets recovers. Further, invest only the money which you can afford to lose.
2. Extreme Greed(85-100)
Opposite to extreme fear, extreme greed means that the prices are overbought. This generally happens when there has been a long rally in prices and these prices are very close to all-time highs. At this point more and more people want to buy and hence they become greedy. This greediness is displayed as a score very close to 100. A very high index score means that the markets are near the top. At such points, it is advisable to book profits and buy when the prices come down.
The middle scores are relative but their movement matters. When the markets retrace from the top, the score reduces and when they retrace from the bottom, the score increases.
- Increasing score near the bottom means that markets are recovering
- decreasing score near the top means people are booking profits and the prices may reduce or cool off
- in the middle, the directional increase means more people are buying and directional decrease means more people are selling.