Question #216 ·
What does the Fear and Greed Index measure and how did its recent Extreme Fear value affect Bitcoin?
- It measures daily trading volume and liquidity on exchanges without reflecting trader emotion or market psychology.
- It tracks Bitcoin network hashrate and miner activity to warn of impending price reversals market shifts.
- It measures overall market sentiment from extreme fear to extreme greed and helped indicate oversold conditions. Right answer
- It gauges social buzz about Bitcoin but does not quantify investor fear levels or buying pressure.
Why is this the correct answer?
The Fear and Greed Index aggregates data such as volatility, market momentum, social media activity, and surveys to gauge whether traders are fearful or greedy. A reading of 21 falls in the Extreme Fear zone, suggesting that many traders are overly pessimistic. Historically, such oversold conditions can precede a market stabilization or rebound because extreme selling pressure tends to exhaust itself and attract contrarian buyers.