Alternative.me, a platform for optimizing connections between a variety of software and product alternatives, publishes a “crypto fear and greed” index metric.
The metric, on Tuesday, rose from 83 to 95, suggesting a level of “Extreme Greed.”
Similar to other gauges that track fear on traditional stock markets, this crypto index uses a number of metrics to measure investor sentiment from a scale of zero to 100, ranging from “Extreme Fear” to “Extreme Greed”.
The company measures two primary emotions that can influence how likely investors are to purchase cryptocurrencies: 1) fear. 2) greed.
Extreme fear means that investors are being too worried. So, they are more likely to retreat from the market, prompting prices to fall and that could mark a good time to buy, according to Alternative.me.
Contrastingly, when investors get too greedy, this could mean cryptocurrency prices are expected for a correction. This means there is a great possibility of a price dropdown.
When the metric index last reached the same (95) level, two days later bitcoin hit its first record high of the year about $41,000. And sometime later, the price fell to as low as $28,750.
To measure the “fear and greed” indicator, the company takes these factors into account. current volatility, market volume, sentiment analysis on social media, market cap share, and Google trends data.
Yesterday, Bitcoin hit a fresh high of above $48,200 after Tesla’s $1.5 billion investment in the token. Ethereum also recorded a new all-time high above $1,820 for the first time ever.
Jerry Klein, managing director at Treasury Partners had previously said:
“While Tesla shareholders are reacting positively to the news, it remains to be seen how shareholders would react if a decline in bitcoin’s price negatively affects Tesla’s future earnings.”
Especially that a dump in Bitcoin price can happen every time in the next couple of days.