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When times are good, money is coming in from your job, the sun is shining, and economies around the world are prospering then investing in Bitcoin, crypto or other investment vehicles like stocks is a given.
But when times are bleak. During the time of the worldwide economic recession of 2008 and the current times of coronavirus 2019/2020 investing seems like a thing in the past, or for the far future.
And the Crypto Fear and Greed Index captures the overall market sentiment.
That makes sense. When times are tough we spend less on the luxurious things in life, like travel, eating out, and perhaps our more ‘riskier’ investments.
During these times investing in long-term and safer areas can feel like the better choice.
Similar to when things are going great we can often feel more comfortable taking more risks in our investment strategies.
This is true for how we act and think as humans, and how our societies work. This is true for both Bitcoin and cryptocurrency investing as it is for investing in stocks, bonds, funds and commodities.
Is this rational thinking? No it’s not. It is extremely emotionally-driven.
We take comfort in what seems to be safe as a way of minimise risks of fear when there is too much of that in our lives generated by other events. As a way to balance the fear levels in our lives.
Hence the combination of both has been used in a tool called the Fear & Greed Index.
When times are tough fear is used to capture our emotional states
And when things are looking bright greed is used
The CNN Fear and Greed Index
The original (CNN) Fear & Greed Index was developed by CNN Money. And it is today extremely well-known in the investment and business sectors. And it captures the emotions that flood the markets in an easy overview visual index.
It is based on seven indicators in the market:
- Stock Price Momentum: Following the S&P 500 index moving average
- Stock Price Strength: The number of stocks hitting 52-week highs and lows (NYSE)
- Stock Price Breadth: The trading volume, if it’s on the rise or declining
- Put and Call Options: The ratio of Put / Call options on the market
- Junk Bond Demand: The spread between yields on investment grade bonds and junk bonds
- Market Volatility: The average volaitility on the market captured by VIX index.
- Safe Haven Demand: Is there an increased interest for safer investments (stocks versus treasuries)
Like any tool, index or chart it is not meant to provide us with clear instructions for how to act and how to invest.
But it does give you an indication of what the rest of the market is doing.
And similar to the CNN Fear & Greed Index there is an equivalent Index for the cryptocurrency market.
The (Bitcoin) Crypto Fear and Greed Index
Similar to the index developed by CNN, there is a equivalent index for the cryptocurrency market.
The (Bitcoin) Crypto Fear & Greed Index.
It is based on other indicators (of course) than the CNN Index. And today the index is only for Bitcoin and the Bitcoin market.
The indicators that forms the result of the crypto Fear & Greed Index are:
- Volatility (25%): Measuring the volatility on the market compared to the past
- Market Momentum/Volume (25%): Current market volume and momentum measured and compared to the past (30/90 day average)
- Social Media (15%): Today measuring Twitter activity and volume + frequency are the key indicators used here
- Surveys (15%): The website strawpoll.com are running weekly crypto polls asking visitors to provide their picture of the market (getting 2000-3000 votes weekly)
- Dominance (10%): Here Bitcoin’s dominance is measured. With the concept of increased BTC dominance caused by fear, as Bitcoin is seen as more of a safe haven compared to altcoins. And with decreased BTC dominance this means people are focusing on “riskier” altcoins
- Trends (10%): Here Google Trends are measured. Looking into search volumes for Bitcoin-related searches are measured and compared with past volumes.
So the indicators are slightly different, and they are also different because of the generational changes between the stock market and the cryptocurrency market (crypto vs stock market).
How can I use the Crypto Fear & Greed Index?
Ok, so there is an index that represents the overall fear and greed in the market, but what does it mean for how you should buy, sell, trade or hold?
How can you take advantage of the Crypto Fear & Greed Index and either:
- Improve your crypto-stack?
- Find underpriced assets?
- Find overpriced assets?
- Learn and improve your trading and strategies?
These are a few potential examples of motivations that (almost) every crypto trader has.
I mean besides of having fun we all want to make money if we see the Bitcoin and crypto market as an investment opportunity.
So the questions is then how can you use the Crypto Fear & Greed Index?
Well the main outliners are when there is either extreme fear, or extreme greed. Often when there is extreme greed the market is overbought and potentially overpriced.
Meaning we could see a correction at some point.
And vice versa when there is extreme fear it could be a sign it is oversold and time for a rebound.
Here below we can see when there is extreme fear…
And here we can see extreme greed…
But like any instrument or tool, it is extremely hard to just rely on that indicator only and base any investment decisions on it.
Doing that would still be more of a gamble than a smart investment strategy.
There are too many unknowns, and other factors that plays in.
But it can help you as a reminder to not get carried away.
When things looked as bleak after Bitcoin’s and the cryptocurrency market big drop after the bull run to $20,000 USD and subsequent fall down to the low $3000s we should have stayed calm and potentially seen it as a great investment opportunity.
Similar at the height of Bitcoin at $20k and the crazy rush to altcoins we should have seen it as signs of what could come and not engage in FOMO investing.
Most markets moves in cycles. Larger macro cycles which describes the overall market sentiment. And within those macro cycles we can also see micro cycles.
For example the recovery of the stock market during current coronavirus crisis can portray the micro events that is happening.
But overall we can still that we are in a downward macro cycle.
- When extreme greed is in place = cryptocurrency market could be overbought and people tend to rush to altcoins with greed/*hope clouding their views
- When extreme fear is in place = people tend to avoid riskier investments, from getting out of altcoins to avoiding the crypto market entirely
- Fear & Greed Index can be used to capture market cycles and see where we are currently
*Hope has been used as another way to try and describe the emotional state of investors. And I personally think it is a combination of both.
It probably depends on the investor and the experience they have. And things are rarely black or white just.
“Greed, for lack of a better word, is good.”
This famous quote is from the film Wall Street where famous investor Gordon Gecko describes the emotions of the market
“Buy when there’s blood in the streets, even if the blood is your own.“
And this famous quote was phrased by Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family.
And the purpose of this investment strategy is obviously clear. When there is fear then there is your opportunity. And I guess this is overall true. Bad times calls for opportunities.
Similar to how the current effects of the coronavirus is causing havoc on the world’s economies it probably is also opening up for new investment opportunities to be found, and used.
It is now the experienced investors and traders wants to come in and (probably) worsen the situation to maximise the gains.
Don’t make any investment decisions only from the Crypto Fear & Greed Index. Don’t make any investment decision just from one single index, chart, Social Media post, comment, etc.
But do take in the knowledge and information presented to you via this index, and others. And do engage with other investors, survey the forums and Social Media and make all of the information generated there a part of your overall learning and strategy-building.
And understand that when you are feeling the strong emotions to either side, understand that they are just emotions. And understand that they are happening to everyone.
My own plan is to have a long-term investment plan, that I continuously re-evaluate. And I tend to not make any quick investment decisions. I am comfortable with this.
I am comfortable knowing I don’t need to chase the quick gain and potentially miss out on the 20x opportunity.
What is your investment strategy?
And do you use the Crypto Fear & Greed Index today? If so how? Tell us in the comment section below!
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Hello and welcome to Go Cryptowise.
My name is Per Englund and I’m a long-term fan and investor of Bitcoin and other cryptocurrencies. I’ve been around the space for a good few years, learning how it all works and to be a part of this engaging community.
Now it’s time for me to share my experience with others. I am also a business and product developer so I know first-hand what it takes to create a successful product, brand and customer experience.
And I am bringing this vision to my writing and how Go CryptoWise work.
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Get in touch with me to find out more about Go CryptoWise and what we care about.
Does Bitcoin’s ‘buy today, sell tomorrow’ strategy always work?
To the investment world, Bitcoin just doesn’t make sense. An asset with no financials, no quarterly earnings reports, no management to speak for it on investor calls, no valuations, no annual report, no head office, nothing. How does one value something like this in order to invest in it? There’s a simple answer – They don’t.
Bitcoin is more or less seen as an asset of the future. And for an asset of the future, you don’t look at present fundamentals, not just because there are none, but because you can’t evaluate it correctly. For this reason and more, Bitcoin is popular among a lot of traders. The fickle, fast-moving, and shrewd operators of the markets who don’t care about the worth of an asset, as long as it gives them a return. Let’s look at Bitcoin’s market based on the perspective of these people.
In order to consider this, let’s take a neutral stance. Let’s look at the Bitcoin market as a buy-today-sell-tomorrow kind, rather than a hodl for weeks, or make a handful intra-day trades kind. In part, because this would still come under the category of trading, but mainly because it’s easier to pull out the daily close price of Bitcoin, rather than its hourly, or even by-minute estimates.
Right, with that sorted, let’s get into the numbers. If you simply and blindly conducted a buy-today sell tomorrow strategy for all the eight completed months and the first 5 days of September, how much would you have made? Before answering this, bear in mind that Bitcoin began the year at $7,500, broke past $10,000 twice, before breaking down to $4,000. It’s now up over $10,000 again. Oh, and two weeks ago, it was over $12,000. Back to the question, how much do you think you’d have made?
Well, it’s a cool $2,993, or an average of 21.15 percent by buying and selling each day for 8 months. Granted, that’s too many transactions, 248 to be exact, and it doesn’t include order and withdrawal fees, but it’s still a good amount, isn’t it? In fact, if you would’ve ended your long trading game on 31 August, rather than 5 September, you would’ve made $4,476 or a 35.3 percent return by avoiding the 3 September drop from $12,000 to $10,000. In terms of a monthly return, five of the eight months returned positive and three negative. The positive returns totaled $7,765 and the negative $3,289.
So, make of that what you will, but it does go on to state that Bitcoin trading on a day-to-day basis, provided you have the time, capital, and an exchange that doesn’t eat up a lot in fees, will allow you to make a good profit for yourself.
Binance Says Regulatory Restrictions Preventing Traditional Brokers From Offering Crypto Services
Crypto exchange Binance says the current regulatory environment is keeping traditional brokers from offering crypto services.
In a recent report put together by the Binance Broker and Binance Research teams, the crypto exchange reveals that traditional brokers have not kept up with the changing needs of financial market participants.
“Due to regulatory restrictions, traditional brokers have not opened up spot crypto services (only derivatives and other instruments). As a result, crypto exchanges have established themselves as the center of the emerging crypto brokerage industry.
Consequently, large crypto exchanges have launched prime brokerage services to provide institutional investors with custody, block trading, aggregation trading, and other services.”
Binance notes that for many decades, prime brokers have positioned themselves as a “one-stop-shop of financial services” for large players in the industry, providing a wide array of offerings including trading, custody, cash management, risk management, stock buybacks, and leveraged trading among others.
As prime brokers struggle to tread the territory of digital assets, crypto exchanges have stepped up to meet the growing demand of institutional firms.
“Some crypto exchanges, wallets, and trading terminals have begun prime brokerage businesses. For instance, Coinbase offers prime brokerage starting from custody, whereas Huobi and Bequant offer prime brokerage with [over-the-counter] block trading….
Crypto broker service providers have empowered brokers to offer services to institutional participants from both crypto and traditional brokerage environments, promoting the lateral expansion of the industry through non-crypto companies offering dedicated crypto trading to their users, which is expected to further lower entry barriers in the industry.”
As to where the crypto brokerage industry is headed, Binance believes traditional brokers will soon start offering crypto services as regulatory requirements ease.
“As the crypto industry continues to develop, the gap between the conventional financial market and the crypto market will continue to narrow. With a growing base of retail and institutional users, an expanding market, and the emergence of increasingly specialized functions, a virtuous cycle of growth started.”
You can read the full report here.
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Everything You Need to Know About the Yearn Finance Projects
Have you heard about Yearn Finance’s YFI token? It acts as a governance token for its decentralized finance platform.
It broke Bitcoin’s record of the all-time high in terms of USD prices. The YFI token attained highs of over $38,000 in August and even peaked above $43,000 in mid-September 2020.
Do you know what’s the difference between the YFI project and other majority governance tokens in DeFi? Scarcity! Yes, there’s a very limited supply of YFI tokens. The maximum supply can never exceed 30,000 YFI tokens. At the moment, there are 29,968 YFI tokens in circulation already, according to CoinMarketCap.
This article takes a look at all the different Yearn Finance projects and forks. Let’s learn what’s unique about each project and why it has been created? If you are not very familiar with yield farming, check out our detailed guide on yield farming.
We’ll cover the following projects:
- Yearn Finance (YFI)
- Yearn Finance Fork (YFII) – DFI.money
- Yearn Value (YFV)
- Yearn Finance Link (YFL)
- Yearn Fuel (YFUEL)
#1. Yearn Finance (YFI)
Yearn Finance began its operations in February 2020 with another project known as iEarn Finance. Going further, iEarn was rebranded as yEarn by Andre Cronje. You can look at yEarn as the first professional attempt at creating a yield farming project. However, yEarn has a few more capabilities added to its arsenal.
Yearn Finance is a DeFi platform where users can deposit and stake their ERC20 tokens. In return, they receive daily interest. This is made possible by allocating the capital to staking pools offering best returns across the network.
Why was this so revolutionary? Before yield farming got mainstream, users had to stake individually with each protocol, having to learn about many projects. Using the Yearn project, users didn’t have to flip through multiple DeFi sites to get yield farming profits. Yearn solved this problem by integrating many different blockchain protocols. So, you only have to stake tokens once with Yearn to get access to many interest-yielding blockchain protocols. To maximize profits, the Yearn protocol continuously rebalances as yield-farming opportunities shift.
— Arthur Hayes (@CryptoHayes) August 30, 2020
#2. Yearn Finance Fork (YFII) – DFI.money
YFII was forked by the crypto community of China from YFI. YFII is YFI’s first fork. The YFII token is the hottest currency today in the Chinese DeFi ecosystem. The YFII fork has been created because a governance vote for YFI wanted to introduce weekly halvening to the project, referred to as the YIP-8 proposal.
However, this proposal failed to pass. Therefore, the YFII fork has been created, implementing the halvening proposal. In other words, the YFII project has a 98% code similarity with the YFI project.
The maximum supply of YFII has been capped to 40,000. The initial perception of YFII was that it is a scam. Hence, Balancer had blacklisted the token. However, the YFII token is doing quite well today, and its recent ATH was $6000.
#3. YFValue (YFV)
YFValue, denoted by YFV, is a fork of YFII. It was announced on August 16th, 2020, through a Medium post. So, what’s the role of the YFV token? It acts as a governance token of the YFValue protocol. They aim to make yield farming accessible to all users worldwide. They want to make yield farming more inclusive to achieve their mission of accessibility: “Bring farming to everyone.”
Now, the question arises – does YFV have any unique feature? It indeed does. YFV token grants its holders a right of voting to control the rate of the supply and also the referral system. The burning of the token is automated and happens fully on-chain. The maximum supply of YFV tokens has been capped at 15,750,000.
Furthermore, among YFValue’s mission, we can find “insurance.” The goal is to use “an insurance treasury through contributions of the YFV team and community funds to engage and integrate an insurance protocol, such as Nexus Mutual, to further reduce risk on behalf of all YFV stakeholders.”
#4. Yearn Finance Link (YFL)
The project wants to leverage the DeFi-backed governance token to achieve more for the Chainlink supporters. You must have already understood by now that this project has its origin in the Chainlink community.
The YFL development team took Andre Cronje’s YFI project and forked it. They adapted it to allow for staking LINK. Later on, they also brought the concept of yield farming to LINK holders. The maximum supply is capped at 85,000. Many analysts call YF Link the connecting bridge between ChainLink and Yearn Finance.
To give a quick example, you can deposit LINK and YFLINK tokens into a Balancer pool, giving you BPT tokens. Next, those BPT tokens can be staked with the YFLINK pool. That means you can both earn YFLINK from the YFLINK pool and BPT from the Balancer pool. Moreover, Yearn Finance Link hosts five different pools, all with their unique configurations for increasing yield.
#5. Yearn Fuel (YFuel)
The project aims to make Yearn Finance genuinely accessible. It wouldn’t matter if a user is a big whale or small investor as Yearn Fuel wants to make Yearn Finance accessible to everyone.
It has some very unique features, which include the right of voting to control the inflationary rate of the supply. Additionally, the YFuel token will also grant the user a right to vote on the referral system. It comes with automatic burning, and the whole burning happens fully on-chain.
They are also implementing a new economic model of token burning. They have named it “Grafuel.” Under the Grafuel model, they will burn as much as 1% of the total token supply per month, starting from the 15th of each month. The idea behind this model of token burning is that it will lead to an increase in liquidity.
Wrapping Up the Yearn Finance Universe
It’s interesting to see so many Yearn Finance clones pop up to satisfy the different needs yielders might have. However, this has opened up another wave of crypto scams where people quickly create a new Yearn Finance clone with slightly modified rules. We see the same crypto craze as when the ICO boom happened. People throw in money blindly into those yield farming projects expecting significant returns.
However, we can’t deny that yield farming has proven to be an excellent case for DeFi and even got the momentum to convert bearish into bullish momentum for crypto markets.
YFI tokens were initially envisioned to be valueless, but that’s not going to happen anymore. It is quite obvious from the rising prices of YFI and its clones.
So, how long can this boom last? These tokens do have good use cases, and their limited supply is driving their prices high. The success of yield aggregation platforms has helped YFI clones take off as well. Some of the YFI clones may get lost in time. But we sure are witnessing something incredible.
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