Almost panic-sold everything, how do you deal with crypto market fear?

[FrancescaBlu]

Yesterday I went into a crypto chat, and everyone was panicking like Bitcoin is going to zero tomorrow, even though nothing special really happened. That alone made me nervous, and I almost sold everything out of emotion, but luckily I stopped myself in time and decided to read how experienced traders deal with this kind of crowd pressure. One guy I know says that when everyone is shouting “sell”, that’s actually the best time to buy, like the market is just shaking out weak hands before the next move up. How much should you really trust this kind of sentiment? If I see that everyone is scared, how can I tell whether this is actually the bottom, or just a pause before an even bigger drop?

 

[FrancescaBlu]

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Do these indicators take into account things like social media polls or news, or is it just dry statistics based on trading volume on exchanges that doesn’t really see the actual panic people show on Twitter or Google?

 

[SognatoreVero]

What you're talking about is usually called a contrarian strategy. The notion is that when there's extreme fear in the market, sellers eventually get worn out, and that can actually become a really good entry point. I sometimes check the crypto fear and greed index on the iTrusty website. They get information from social media, search trends, Bitcoin dominance, and other things. But remember, it's not a sure thing. When the market is down, fear can stick around for weeks, and the price can keep dropping. It's more like a way to figure out the risk. Also, are you trading spot or using leverage? With futures, you can't always count on indicators like this to save you if liquidity suddenly disappears. In that case, it's better to also pay attention to trading volume and order flow, in addition to sentiment.