With the outbreak of COVID-19 globally, a crash in the economy was seen. Not only did the gold, stock market, and other assets were affected but also a tremendous effect was seen in the cryptocurrency market. However, as days have passed, there is an improvement in the condition of bitcoins and altcoins.
In Spite of the recovery in prices, however, given the choice between the sentiments of fear and greed, according to the crypto market, it is observed that the former sentiment is dominating in the current scenario.
Here comes the thought. Considering the current deteriorating situation of the economy, should one be greedy when the market is fearful or be fearful of taking a new position?
Cryptocurrency is one asset that involves a high risk of loss, with much of its value and importance coming from hype and promise. In such a condition, considering the sentiment of the investors is important. Therefore, realizing the importance of the investor sentiments, a Fear and greed Index was designed in order to study the sentiments of investors and analyze whether the end result is fear in the market or greed.
This index that was developed is said to be accurate enough in showing the sentiments and has been used successfully as a trading strategy.
As the famous Warren Buffett saying goes, “ it is wise to be fearful while others are greedy, and greedy when others are fearful”, often choosing the less favorable side during a condition can help is making huge profits.
With the fear increasing and with a situation like this never seen before, it is more likely suggested that this is the time to buy Bitcoin with whatever is left.
Meanwhile, the crypto market is not the only one tackling the problem of fear amongst the consumers. The rising fear is seen in other industries too and is contributed by one the black event ever seen in history- the pandemic of COVID-19. The pandemic is causing the deaths of people as well as destroying the economy.
Considering the spike in fear level, it is important to wisely make any decision related to cryptocurrency and it is advised to apply various strategies of management while doing so.
This fear, however, is not seen for the first time. It has been observed before but the reason was an increase in prices which is not the case this time and doesn’t have to be the case always.
Though the extremity is more, a mild to moderate fear in the crypto market was seen last year in August 2019, when Bitcoin was trading above $10,000. In the month following, Bitcoin suffered a $2,000 drop.
However, that drop didn’t really take the fear level to the extreme even though it was the largest drop in the year.
No matter what, however, in such situations where the market is being affected, there is a change in the minds of investors and the way they react and it is important to take any decision especially related to cryptocurrency wisely. More factors should be considered while decision making and investments now when the coronavirus outbreak is largely affecting the market.