The DeFi market is not fixed and prices will continue to change. As this happens, people will make and lose money. Considering this factor, it is important to make the right decisions. This article will help people ride the wave of the market and safeguard their investments.
Bitcoin at $70k+: Understanding the Fear and Greed Index in the DeFi Market
Before going into the details of making smart crypto investment decisions, it is essential to understand the fear and greed index. This mechanism is used to ascertain the factors that are driving investor behavior and predict what can possibly happen in the future.
Key Components of the Fear and Greed Index
- Market Volatility:
High volatility indicates fear, while low volatility indicates confidence or greed. - Market Momentum:
Rising stock prices suggest greed, while falling prices indicate fear. - Safe Haven Demand:
Increased buying of safe assets like bonds indicates fear, while selling suggests greed. - Put and Call Options:
A high number of put options (bets against the market) suggest fear, while a high number of call options (bets for the market) suggest greed. - Market Breadth:
A wide range of stocks moving together suggests greed, while a narrow range indicates fear. - Junk Bond Demand:
High demand for riskier bonds indicates greed, while low demand suggests fear. - Stock Price Strength:
The number of stocks hitting new highs versus new lows can indicate fear or greed.
How It Works
- Extreme Fear (0-25):
When the index is low, it means investors are very fearful. This often leads to lower stock prices as people sell off their investments. - Extreme Greed (75-100):
When the index is high, it means investors are very greedy. This can drive stock prices up as people buy in anticipation of further gains. - Neutral (26-74):
When the index is in the middle range, it indicates a balance between fear and greed, suggesting a stable market.
A good example is when Bitcoin hit $70k+
When Bitcoin reached over $70,000, the greed index was high.
- High Prices:
Investors saw Bitcoin’s high price and expected it to rise further. - More Buying:
This led to more buying as people didn’t want to miss out. - Rising Prices:
Increased demand pushed Bitcoin’s price even higher, feeding more greed.
Bitcoin at $70k+: Understanding the Factors Behind It
It is almost impossible to settle on specific factors that caused Bitcoin to reach $70l+. However, there have been several positive incidents since the turn of the year that may have contributed to this the spike in price.
The first case was the Bitcoin ETF approval in the US at the beginning of the year. It was a significant achievement, considering the United States’ Government is typically aversive to the use and ownership of cryptocurrencies. Some of its officials even claimed that digital assets will undermine the central bank and fiat money.
After 4 years and a cycle of block formation completed, the Bitcoin Halving took place on the 20th of April. Shockingly, the market was unresponsive to this incident. This was even more shocking, considering that BTC just became even more valuable and its volume is now reduced in circulation.
Shortly after, Hong Kong Bitcoin ETF approval that allowed people trade cryptocurrencies like traded stocks. It was a conditional approval, and only investors in Hong Kong (not the entire China) can trade BTC ETFs. Like the case of the USA, this was also a significant achievement for Web3.
As explained in the article of the Bitcoin halving, it is difficult to predict exactly when and how the market will change. Nonetheless, the incidents above built up to the increase in BTC value and turn of the market. That said, no one is certain how long it will last or when prices will fall.
Bitcoin at $70k+: Smart Ways to Protect Your Cryptocurrency Investments
As mentioned earlier, Bitcoin has significantly dropped from the $70k+ point. While it will regain its value at some point, there is no certainty as to when that time will be. Considering the risks involved in the DeFi market, here are smart ways to protect your portfolio:
- Know When to Sell: This is particularly for crypto traders and token investors. No matter how valuable your tokens become, you cannot get that worth until you sell. Therefore, it is smart to know when to sell. This will prevent you for having to ride every single market wave. Besides, you do not have to sell everything, as you can sell a portion of the tokens to recoup your capital at least.
- Have a Set Goal and Stick to it: To help you with knowing when to sell, create a well-defined plan. As you invest, ensure to stick with your strategy.
- Do Not Use Cryptocurrencies as Savings: People should not use certain cryptocurrencies as a form of savings. Instead, there should opt for stablecoins like USDT and several other options. You do not want to wait because the token changed in value at a time you need to sell or convert it to fiat.
- Diversify Your Portfolio: This is where many investors tend to get things wrong. When most people hear about diversifying their investments, they most thinks of buying different blockchain tokens. Howwalever, the Blockchain Life Event has shown that portfolio diversification goes beyond purchasing different cryptocurrencies. Instead, it is more about exploring other options like mining for growing your capital.
- Properly Learn About Projects Before Investing: People tend to rush into investments because a project is trending without doing what is necessary. It is essential to understand the value proposition of any project and ascertain if its claims are feasible before investing money. A good place to start is the Whitepaper, as it contains the necessary information any investors need to have.
- Invest in the Tectum Ecosystem: if you are still confused on which projects to invest in, you can invest in Tectum (the fastest layer 1 blockchain_) by purchasing TET: This token powers an extensive ecosystem that includes SoftNote (a noncustodial wallet) and SoftNote Bills (a layer-2 blockchain solution). Instead of simply buying and holding this cryptocurrency, people can stake it to get up to 20% APR.
