Greed and fear, two of the most common human emotions, are also the sentiments that affect the decisions of an investor the most. In fact, these market sentiments have, for the longest time affected the present condition and future state of the markets.
When it comes to classic asset classes and crypto-based assets, the trend suggests that these always end up moving in opposite directions. The current market state is further proof of that factor.
Here’s taking a look at the differences in the performance of classic assets and crypto assets, and how it all affects the market sentiments.
The shifts in current market sentiments
Factors like epidemics, trade wars, geopolitical tensions, financial meltdowns, economic crisis, and even the coronavirus attack, are the things that affect the crypto assets and traditional assets in completely different ways.
The classic assets like stocks tend to lose their value when the investors speculate risks in the financial and economic systems. On the other hand, people start relying more on digital currencies which makes them gain value.
The market sentiment now is more towards neutral rather than gravitating towards fear or greed that’s common with typical investments.
Before getting into the impact of the current market sentiments on classic and crypto assets, let’s get a brief idea about how the CNN fear and greed indexes work.
The fear and greed indexes
The fear and greed indexes are used for gauging the emotions of the stock investors, and these use indicators like stock price momentum, along with six other factors.
The diversion from the normal point is noted and based on how far the diversion has gone on a scale of zero to hundred, the predictions of fear and greed are made. Zero indicates extreme fear and a hundred indicated extreme greed.
The present market conditions put the indexes at around 46, which is a neutral state between fear and greed.
Present differences between classic-asset and crypto-asset performance
A massive amount of Chinese shares were sold off recently which led to a chain reaction in the crypto and classic assets market.
The prices of the main cryptocurrencies like BCH and BTH went up after the stock trading began in China, after an extended break of more than one week due the holidays for Lunar New Year.
This rise in the value of the crypto assets confirmed a much-known factor once again: digital assets and traditional stocks are usually negatively correlated.
The crypto index in this present state of the market relies more upon greed at 56, while the traditional stock markets are going more towards fear between 46 and 44. As far as the present conditions are analyzed, fear will continue gripping the traditional assets and affect their performances until greed continues among the crypto-based investors.
The present market sentiments and the differences in the performances are no indicators of the future, or even for the rest of the year. The conditions might just get reversed in the next few months itself.