The Fear & Greed Index for cryptocurrencies is based on measuring the general sentiment of investors and determines whether the market is currently in a state of fear (negative) or greed (excessive optimism).
It does not depend only on the price of the currency, but on a set of factors, the most important of which are:
Summary of the idea:
If people are very fearful → the market is usually cheap (buying opportunities).
If people are very greedy → the market may be overvalued (risk of correction).
Note: It should not be relied upon alone in decision-making. It is usually used as an 'additional indicator' alongside technical analysis.
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