Bitcoin: Can we trust the Fear and Saint Index?

In this period of bear marketrisk can be difficult to predict future market fluctuations. When it comes to Bitcoin, many investors have recently speculated that the $ 30,000 support could break below. Now that it is done, the question of predicting the bottom level obsesses the cryptosphere. Looking for an answer, relying on the Fear and Sint Index may be tempting for some people. What about it? Can we trust it? Elements of response.

What is the Fear and Saint Index?

The Fear and Saint index provides information on market sentiment per asset based on multifactorial analysis. If several sites offer it for different cryptocurrencies, keep in mind that Bitcoin calculation is generally better and more relevant.

This one is rated from 0 to 100, first indication a state of extreme fear on the market and strong pressure to sell, the latter naming the opposite the buying situation motivated by a strong profit lure. The Fear and Sint Index gradient extends from “panic selling” to “FOMO buying”. This index is calculated on the basis of five parameters.

volatility

Market volatility informs the enthusiasm it creates. It is calculated on the basis of a comparison between drawdown (a measure of the fall in price compared to an observed peak) and average asset values ​​over 30 and 90 days.

Market volume

Also calculated over 30 and 90 days as well, large buying volumes indicate that the market is particularly greedy and can artificially warn of a bullish trend.

Social network analysis

The latter is especially important for the cryptocurrency market. In fact, social networks have a wealth of information about investor sentiment.

dominance

Looking at the market capitalized share of an asset, primarily Bitcoin, over the rest of the cryptocurrencies also contribute to the calculation of the Fear and Saint Index. The higher the dominance of Bitcoin, the less the movement on altcoins could indicate a downward trend.

The trend

Finally, the analysis of Google searches for Bitcoin-related terms, by Google trends, is the last parameter that is included in this assessment of market outlook.

Interpretation and reliability of the Fear and Saint Index

In short, the lower the index, the greater it shows a feeling of panic in the market and high value indicates perhaps excessive greed. However, the Fear and Carving Index should be viewed as a reflection of investor sentiment. It should, therefore, be used primarily to understand a trend and learn less about an investment behavior to be adopted.

So a low score reflects the anxiety over the market. While a lack of investor confidence may be an instinctive interpretation of its departure, it should, on the contrary, be seen as a sign potential opportunity.

When the index is high, on the other hand, and indicates a general runaway, the buyer prefers to be cautious and the seller may consider closing its positions.

These two typical scenarios are not enough to illustrate the complexity of the dynamics underlying a market like Bitcoin. So let’s remember that the Fear and Super Index gives an insight into investor confidence at any given time. However, a literal reading would be a mistake. If this index is well built and reliable, it should not be enough encourage rational purchasing behavior.

The Fear and Saint index, however, allows the investor to better understand the irrational nature of the markets and draw conclusions, depending on the strategy he wants to adopt.

Crypto-assets are a risky investment.