Endgame Fear & Greed Sentiment Strategy

About

The crypto market behavior is very emotional. People tend to get greedy when the market is rising. Also, people often sell their coins in

irrational reaction when the market turns red.

Strategy

We sell if People tend to get greedy when the market is rising which results in FOMO (Fear of missing out) and buy when there is extreme

fear. With our Fear and Greed Index tool, we try to save you from your own emotional overreactions. There are two simple assumptions:

  • Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
  • When Investors are getting too greedy, that means the market is due for a correction.

Therefore, we analyze the current sentiment of the Crypto market and crunch the numbers into a simple meter from 0 to 100. Zero means

“Extreme Fear”, while 100 means “Extreme Greed”. See below for further information on our data sources.

Data Sources

We are gathering data from the five following sources. Each data point is valued the same as the day before in order to visualize a

meaningful progress in sentiment change of the crypto market.

First of all, the current index is for bitcoin only (we offer separate indices for large altcoins soon), because a big part of it is the volatility of

the coin price.

But let’s list all the different factors we’re including in the current index:

“VMSSDT” Volatility (25 %)

We’re measuring the current volatility and max. drawdowns of bitcoin and compare it with the corresponding average values of the last 30

days and 90 days. We argue that an unusual rise in volatility is a sign of a fearful market.

“VMSSDT” Market Momentum/Volume (25%)

Also, we’re measuring the current volume and market momentum (again in comparison with the last 30/90 day average values) and putting

those two values together. Generally, when we see high buying volumes in a positive market on a daily basis, we conclude that the market

acts overly greedy / too bullish.

“VMSSDT” Social Media (15%)

While our Reddit sentiment analysis is still not in the live index (we’re still experimenting with some market-related keywords in the text

processing algorithm), our Twitter, Facebook, Instagram, and TikTok analysis is running. There, we gather and count posts on various

hashtags for each coin (publicly, we show only those for Bitcoin) and check how fast and how many interactions they receive in certain

time frames). An unusually high interaction rate results in a grown public interest in the coin and in our eyes corresponds to greedy market

behavior.

“VMSSDT” Surveys (15%)

we’re conducting weekly crypto polls and asking people how they see the market. Usually, we’re seeing 2,000–3,000 votes on each poll, so

we do get a picture of the sentiment of a group of crypto investors. We don’t give those results too much attention, but it was quite useful

at the beginning of our studies.

“VMSSDT” Dominance (10%)

The dominance of a coin resembles the market cap share of the whole crypto market. Especially for Bitcoin, we think that a rise in Bitcoin

dominance is caused by a fear of (and thus a reduction of) too speculative alt-coin investments since Bitcoin is becoming more and more

the safe haven of crypto. On the other side, when Bitcoin dominance shrinks, people are getting more greedy by investing in more risky

alt-coins, dreaming of their chance in the next big bull run. Anyhow, analyzing the dominance for a coin other than Bitcoin, you could argue

the other way round, since more interest in an alt-coin may conclude a bullish/greedy behavior for that specific coin.

“VMSSDT” Trends (10%)

We pull Google Trends data for various Bitcoin-related search queries and crunch those numbers, especially the change of search volumes

as well as recommended other currently popular searches. For example, if you check Google Trends for “Bitcoin”, you can’t get much

information from the search volume. But currently, you can see that there is currently a +1,550% rise in the query „bitcoin price

manipulation“ in the box of related search queries (as of 05/29/2018). This is clearly a sign of fear in the market, and we use that for our

index.

The Fear & Greed Strategy will try to save you from your own emotional overreaction by longing for correctional dips and shorting

psychological tops with 4 supporting auto-trigger indicators to use together and quantify an entry/exit point on the 2nd day we are below

20 or above 80 respectively.

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