How to Use the Fear and Greed Index To Your Advantage

How to Use the Fear and Greed Index to Your Advantage

CNN’s Fear and Greed Index tries to track which emotion is driving the stock market. The index is based on the premise that fear and greed influence investment behavior, with investors selling shares when they’re scared and buying them when they desire greater profits.

Here’s a closer look at how the Fear and Greed Index (FGI) gets calculated, as well as how investors can use the gauge to inform their investment decisions.

Understanding the Fear and Greed Index

The Fear and Greed Index uses a scale of 0 to 100. The higher the reading, the greedier investors are, with 50 signaling that investors are neutral. To give some historical context, on Sept. 17, 2008, during the height of the financial crisis, the Fear and Greed Index logged a low of 12.

Seven different indicators are used to calculate the Fear and Greed Index.

CNN tracks how much each indicator has veered from its average versus how much it normally veers. Then each indicator is given equal weighting when it comes to the final reading. Here are the seven inputs.

  1. Stock Price Momentum: The S&P 500 versus its 125-day moving average. Looking at the benchmark equity gauge relative to its own history can measure how the index’s 500 companies are getting valued.

  2. Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange. Share prices of public companies can signal whether they’re getting overvalued or undervalued.

  3. Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining. Market breadth can be used to gauge how widespread bullish or bearish sentiment is.

  4. Put and Call Options: The ratio of bullish call options trades versus bearish put options trades. Options give the right not the obligation to buy or sell an asset. Therefore, more trades of calls over puts could indicate investors are feeling optimistic about snapping up shares in the future.

  5. Junk Bond Demand: The spread between yields on investment-grade bonds and junk or high-yield bonds. Bond prices move in the opposite direction of yields. So when yields of higher-quality investment-grade bonds are climbing relative to yields on junkier debt, investors are seeking riskier assets.

  6. Market Volatility: The Cboe Volatility Index, also known as VIX, is designed to track investor expectations for volatility 30 days out. Rising expectations for stock market turbulence could be an indicator of fear.

  7. Safe Haven Demand: The difference in returns from stocks versus Treasures. How much investors are favoring riskier markets like equities versus safer assets like U.S. government bonds can indicate sentiment.

On its website for the Fear and Greed Index, CNN gives a breakdown for how each indicator is faring. For instance, whether each measure is showing Extreme Fear, Fear, Neutral, Greed, or Extreme Greed among investors.
“Stock Price Strength” might be showing Extreme Greed even as “Safe Haven Demand” is signaling Extreme Fear.

Dos and Don’ts of Using the Fear and Greed Index

Why is the Fear and Greed Index useful? For the same reason why it can be helpful to check the temperature of any setting.

Gauging how hot or cold can help determine which move you want to make next as an investor. Are you being too greedy? Too fearful? Is now the time to think about herd mentality?

Also generally, some investors often try to be contrarian, so when markets appear frothy and the rest of the herd appears to be overvaluing assets, investors try to sell, and vice versa.

Recommended: Should I Pull My Money Out of the Stock Market?

Do’s

Use the index to realize that investing can be emotional but it shouldn’t be.

Use it to determine when to enter the market. Let’s say for instance you’ve been monitoring a stock that becomes further undervalued as investor fear rises, that could be a good time to buy the stock.

Recommended: Timing the Stock Market

Don’ts

Don’t only rely on the Fear and Greed Index or other investor sentiment measures as the sole factor in making
investment decisions. Fundamentals–like how much the economy is growing or how quickly companies in your portfolio are growing revenue and earnings–are important.

For instance, the FGI may be signaling extreme greed at some point, with all seven metrics also flashing greed. However, this extreme bullishness may be warranted if the economy is firing on all cylinders, allowing companies to hire and consumers to buy up goods.

Recommended: Using Fundamental Analysis on Stocks

The Takeaway

The Fear and Greed Index is one of many gauges that tracks investor sentiment. Investors generally use it to take a contrarian view of the markets, so when the rest of the herd appears fearful, they buy, or if they’re greedy, they sell. While it can be a useful tool to decide timing on certain investments, it shouldn’t be used as the only determinant in investment decisions.

Ready to buy and sell stocks, ETFs, fractional shares, or cryptocurrencies on your own? Online trading with SoFi Invest offers an Active Investing platform, where investors can make their own decisions on how they want to build their portfolios. If choosing your own investments is not for you, the Automated Investing services takes into account your preferences and manages a diversified portfolio for you.

Start trading on SoFi Invest today.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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What Are NFTs (Non-fungible Tokens)?

Non-fungible tokens (NFT) are cryptographic digital assets that each have uniquely identifiable metadata and codes. Their data is stored on the blockchain, ensuring they can’t be replicated or forged.

The tokens act as a representation, like an IOU, for either digital or tangible items. For instance, one could create NFTs that stand for digital artwork, virtual real estate in a game, collectible Pokemon cards, or even someone’s personal identification information.

Currently the majority of the NFT market is focused on collectibles like sports cards and digital art. But there are other highly priced NFTs on the market as well, such as a tokenized version of the first-ever tweet, created by Twitter CEO Jack Dorsey.

Let’s dive into the details about how NFTs work, what they’re important, and what makes them valuable.

What are NFTs Used For?

The concept of digital representations of material items is not new. But the addition of blockchain technology makes NFTs important. As part of a blockchain, NFTs are easily verifiable and unique, each one able to be traced back to the original issuer.

NFTs are revolutionizing gaming, art, and the collectibles market. They also have the potential to transform real estate, travel, and identity management. Millions of dollars have been spent on NFTs over the past few years, and their popularity is increasing amongst both collectors and crypto traders.

NFTs and Gaming

For the first time, immutable ownership and efficient sale of collectible and in-game items is possible. This opens up many opportunities for online gaming and world creation. For instance, within virtual worlds like Decentraland and The Sandbox, players can create pretty much any business one might create offline—design and sell hats, create avatars, or sell theme park tickets. Players can even create in-game currencies to sell to other users.

NFTs and Art

NFTs are revolutionizing the art world. Using an NFT exchange, artists can sell digital art directly to buyers, removing the need for a gallery or auction house. Typically, middle men can take a large percentage of sale profits, which means artists may be able to increase their profits using NFTs. It’s even possible for artists to earn royalties each time their artwork or music is sold. The most expensive digital art sold so far was a group of NFTs created by Beeple which sold for over $69 million.

NFTs and Identity Management

There are also use cases for NFTs in identity management. Currently people around the world travel with physical passports, which can easily be lost or stolen, and even replicated or forged. Storing identity information on the blockchain has the potential to eliminate these risks and may one day make travel processing more efficient.

NFTs and Real Estate

Another use case for NFTs is in real estate. Dividing up a property is difficult, but dividing digital real estate is easy. Multiple people can invest in and exchange property if it has been digitized. This principle can also be applied to other material assets.

NFTs and Supply Chain

NFTs can also help improve and validate supply chains. For instance, a coffee company could prove that their beans are fair trade. A wine company could create an NFT for each bottle of wine to keep track of every step of its production.

NFT Standards

Most NFT tokens are currently created using one of two Ethereum token protocols, ERC-721 or ERC-1155. These are essentially blueprints for tokens that were created by the Ethereum team. The blueprint creates a template for certain information that must be included for any new NFT, such as security and ownership information. By standardizing the way this information is created, NFTs are easily distributed and exchanged.

Starting with a blueprint, software developers can create NFTs that are compatible with large public exchanges and NFT wallets such as MyEtherWallet and MetaMask. This ensures that people can buy and sell the NFT and hold it in their own personal wallet.

Other blockchain networks such as Tron, Neo, and Eos are also building out NFT token standards. Each one has different token functionality, so software developers can choose which platform is best for the token they are creating.

What Makes NFTs Valuable?

As with any type of asset, supply and demand drives the price of NFTs. Since there are only so many of each collection of NFTs or individual NFTs, this can make the demand for them very high.

One might wonder what the value would be in owning a representation of a limited edition item as opposed to the real thing. NFTs are both easily verifiable and completely unique. This makes them easily tradable online. Their code is also useful because each NFT can be traced, including past transactions of that token. This provides security, transparency, and prevents fraudulent items from being sold.

Gamers, investors, and collectors have been flocking to the NFT market because they see the potential for market growth and significant profits.

Within certain online games, for example, real estate is a prized possession. If one owns a plot of land on a main road in a virtual world where they could open up a casino, that has the potential to make a lot of money. So that plot of land is very valuable.

Are NFTs Cryptocurrencies?

Cryptocurrencies, like physical money, are fungible assets, which can be exchanged and used for financial transactions because they are identical to one another. For example, one USD is always equal in value to another USD. Although NFTs are built on blockchain technology, they aren’t the same as cryptocurrencies, in that they can’t be exchanged with one another. Think of an NFT like a passport or a ticket to an event. Each one is unique.

An NFT that represents a baseball card can’t be directly exchanged for one that represents a piece of digital art. And even an NFT that represents one baseball card can’t be exchanged for one that represents a different baseball card. The reason for this is that each NFT is unique and contains specific identification information.

However, NFTs are similar to cryptocurrencies in that they have attributes and metadata that makes them easily transferable and identifiable.

Key Characteristics of NFTs

There are several characteristics of NFTs that make them different from other types of assets and that appeal to investors. They are:

•   Indivisible: Unlike Bitcoin or other forms of cryptocurrency, NFTs can only be bought and sold in their entirety. They can’t be divided into smaller portions.
•   Non-interoperable: Just as NFTs can’t be exchanged for one another, one type of NFT can’t be used in another NFT system or collection. NFTs used in online games, for instance, are like a playing card or game piece. Just as a Monopoly piece can’t be used in the game of Life, the owner of a CryptoKitties NFT can’t use that NFT in the Gods Unchained game.
•   Indestructible: Token information is securely stored on the blockchain using smart contracts. This means NFTs can’t be erased or copied.
•   Immutable: One important characteristic of NFTs is that the person who buys one actually has possession of it. They can sell it or hold it. It’s not held by a company the way iTunes holds music and licenses it out for users to listen to.
•   Verifiable: The creation, transaction, and identification information for NFTs can be traced and verified without a third party. This allows anyone interested in buying an NFT to make sure it’s legitimate and do their own vetting before purchase. It prevents the creation and sale of fraudulent tokens.
•   Extensible: Two NFTs can be combined to create a new, unique NFT.
•   Capable of storing metadata: NFT creators and owners can add metadata to NFTs. For instance, an artist could sign their digital artwork.

The Takeaway

The NFT market is still new and full of potential for creators and investors. However, before investing in cryptocurrencies, NFTs, or any other digital asset, it’s important to research and understand the market.

One way to get started investing in digital assets is with SoFi Invest®. Members can trade cryptocurrencies like Bitcoin, Ethereum, and Litecoin, right from the convenient mobile app.

Find out how to invest in crypto with SoFi Invest.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Guide to Crypto Staking: What it is, How it works, and How to Get Started

Generally, when investors contemplate investing in cryptocurrencies, they think about either mining crypto or purchasing it outright on a crypto exchange. But crypto staking—or staking coins, as it’s often called—is another viable alternative for the crypto-curious to get assets in their wallets.

While “staking” may be a relatively new addition to the financial lexicon, it’s important for those interested in crypto investing to understand what it is, how it works, and what cryptocurrencies it can be used to obtain.

Crypto staking may feel like it’s a step beyond simply learning how to buy Bitcoin or how a crypto exchange works, but learning about cryptocurrency staking can broaden your knowledge, making you a more informed investor.

This article will run through it all, from staking basics to the platforms investors can use for staking coins.

Crypto Staking 101: What is Staking Coins?

Crypto staking is the process of locking up crypto holdings in order to obtain rewards or earn interest. Cryptocurrencies are built with blockchain technology, in which crypto transactions are verified, and the resulting data is stored on the blockchain. Staking is another way to describe validating those transactions on a blockchain.

Depending on the types of cryptocurrency you’re working with and its supporting technologies, these validation processes are called “proof-of-stake” or “proof-of-work.” Each of these processes help crypto networks achieve consensus, or confirmation that all of the transaction data adds up to what it should.

But achieving that consensus requires participants. That’s what staking is—investors who actively hold onto, or lock up their crypto holdings in their digital wallet are participating in these networks’ consensus-taking processes. Stakers are, in essence, approving and verifying transactions on the blockchain.

For doing so, the networks reward those investors. The specific rewards will depend on the network.

It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, who uses the money for other purposes (lending, etc.). Staking coins is, then, similar to earning interest.

How crypto staking works

For the investor, crypto staking is a passive activity. When a crypto investor stakes their holdings (in other words, leaves them in their wallet), the network can use those holdings to forge new blocks on the blockchain. The more crypto you’re staking, the better the odds are that your holdings will be selected.

Information is “written” into the new block, and the investor’s holdings are used to validate it. Since coins already have “baked in” data from the blockchain, they can be used as validators. Then, for allowing those holdings to be used as validators, the network rewards the staker.

Pros & Cons of Staking Coins

Because staking coins is a passive form of investment, there is little downside. But it helps to consider the block rewards associated with staking coins you hold, as well as to recognize the volatility of cryptocurrency in general—if the value of the coin drops, that would impact the value of your staking interest earned.

Popular Types of Staking Coins

There are many different types of cryptocurrency, and many of them can be staked to earn rewards. While this is far from an exhaustive list, here are a few cryptos and coins that can be staked to earn returns:

•   Ethereum: Ethereum has become one of the most popular cryptocurrencies on the market—although it is not exactly a cryptocurrency itself. Staking Ethereum on your own will require a minimum of 32 ETH. Rewards vary, but it’s expected that the rate of return on Ethereum staking is 5-17% per year.

•   EOS: EOS is similar to Ethereum in that it’s used to support decentralized programs. EOS tokens are native to the EOS blockchain, and like other cryptos, can be staked to earn rewards. As of late April 2021, the expected rate of return for EOS staking is 3.2%.

•   Tezos: Like EOS and Ethereum, Tezos is an open-source blockchain network with its own native currency, with a symbol of XTZ. And it, too, can be staked on certain platforms and networks. The current expected rate of return for Tezos staking is around 6%.

How to Start Staking Crypto

To start crypto staking, an investor needs to decide where and what they want to stake. Here are four simple steps to get started.

1. Choose a crypto or coin to stake.
2. Choose and download a digital wallet in which to store your coins for staking. That may mean going directly to the specific crypto’s main website and downloading its corresponding wallet.
3. Purchase at least the minimum required number of coins. Some networks require that stakers have a minimum number of coins to participate (for example, Ethereum holders must have 32).
4. Make sure you have the necessary computing power and an uninterrupted internet connection.

With everything in place, the staking process can begin in earnest. From here, most people will only need to check in on their crypto holdings every once in a while to make sure everything is humming along as it should.

Where to Stake Crypto

There are numerous platforms that allow users to start staking coins, and quickly.

There are big-name platforms that most crypto investors are probably familiar with, including Coinbase and Kraken, which allow users to stake coins. On exchanges like these, investors must opt in to staking in order to benefit from rewards.

Enterprising stakers could also look at “staking-as-a-service” providers—which specialize in staking, rather than exchanging. Examples of those platforms include MyContainer, Stake Capital, and Staked.

It’s important to note that each of these platforms will have different offerings, rules, and fees. It’s worth the time spent researching a few to make sure your goals align with a certain platform before you jump in.

The Takeaway

Staking is a way to use your crypto holdings or coins to earn additional rewards. It can be helpful to think of it as along the lines of generating interest on cash savings, or earning dividends on stock holdings.

Essentially, coin holders allow their crypto to be used as a part of the blockchain validation process, and are rewarded by the network for the use of their assets. For crypto investors, staking can open up another potential avenue to generating returns.

Crypto piquing your interest? With Crypto trading from SoFi Invest®, you can trade crypto like Ethereum, Bitcoin, Litecoin and more, 24/7 in the SoFi app.

Find out how to invest in crypto with SoFi Invest.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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