NFGI: NFT Fear and Greed Index
Introducing the first and only Fear and Greed Index for NFTs! Developed by the $WHALE Market Strategy Team
The NFT Fear and Greed Index (NFGI) provides a single index measure to capture three key dimensions of the NFT ecosystem:
- Behavior of buyers and sellers
- Confidence of the market
- Pricing Mechanism of NFTs
Fear and greed indexes help investors gauge the market sentiment. Based on the premise that excessive fear can result in NFTs trading well below their intrinsic value, and on the other hand, excessive greed resulting in NFTs being bid far above what they should be worth.
The NFGI is a tool to help you make better buying and selling decisions.
👨🏫 How to Read the NFGI 👩🏫
The values on the NFT Fear and Greed Index range from 0 (extreme fear) to 100 (extreme greed).
There are five zones to consider with each assigned a ‘sentiment’ color to best represent the level of fear and greed:
- 0–20: Extreme Fear
- 20–40: Fear
- 40–60: Neutral
- 60–80: Greed
- 80–100: Extreme Greed
When the NFGI is in the Greed zone or approaching the Extreme Greed zone, it is expected that buyers or traders in the NFT marketplace are behaving in a way that is conducive to an overheating market and is due for a correction.
Similarly, when the NFGI is in a lower zone such as the Fear zone, market participants are not as engaged in the market and sales are typically slowing down. The NFT marketplace is correcting and may continue to deteriorate. Once participants are fearful, the market is due for a reversal and it is likely that NFT owners are attempting to off-load their collection at low prices. Bargains can be found here and the market is likely to return to Neutral.
🔢 NFGI Calculation 🔢
Eight key metrics are used as proxies to capture any change in the three key dimensions considered by the NFGI.
The values of each of the eight metrics are run through weighting and methodology models to normalize. They are then scaled linearly versus established ‘goal posts’ to form indices.
Once calculated, these eight indices are aggregated to calculate a geometric mean that is representative of the current market sentiment. (NFGI)
Definitions for the eight key metrics:
- number of daily sales — total number of NFTs sold in a day.
- volume of daily sales (expressed in $) — total US $ spent on completed sales.
- daily active market wallets — number of unique wallets that bought or sold an NFT.
- momentum — a 50-day moving average of daily NFT sales.
- mean reversion — how far the current metric is from it’s historical average.
- volatility — changes to daily sales to capture.
- average sales (expressed in $) — the average price per day in US $ paid for an NFT.
- daily closing price of Ethereum (expressed in $)
The levels of Greed captured by the NFGI are the result of these metrics rising to high levels depicting a period of overzealous behavior, overconfidence and an appetite to overpay for NFTs or, assuming if prices are fixed, then the rate of sales turnover is high or high numbers of, say, open editions and/or pfps are sold. The opposite is the case regarding Fear.
The methodology is reviewed regularly to consider adjustments or additional data sources for improved accuracy. Changes to the methodology will be announced when included.
🔔 Receive NFGI Updates 🔔
Follow the WHALE Community Twitter account and turn on notifications to receive all Fear and Greed Index updates.
In addition to NFGI updates, we’ll also periodically share analytics insights from $WHALE’s dedicated NFT Market Strategy Team.
Jump in the $WHALE Discord if you have any questions or just want to discuss the NFGI and market!
🐳 WHALE COMMUNITY RESOURCES
⚫ ️Website: https://whale.me/
⚫ ️Discord: https://discord.gg/whale
⚫️ Twitter: https://twitter.com/whale_community
⚫️ YouTube: https://www.youtube.com/Whale_Community
⚫️ Instagram: https://www.instagram.com/whale__community/
⚫️ Twitch: https://www.twitch.tv/whalecommunity
⚫️ Reddit: https://www.reddit.com/r/WHALE_Community
⚫️ Medium: https://medium.com/@whalecommunity
⚫️ Telegram: https://t.me/WHALE_Community
