The correlation between different cryptocurrencies can affect portfolio risk management. For example, if Bitcoin and Ethereum move in tandem, a portfolio heavy in both may not provide much diversification. Understanding correlations helps investors balance their portfolios to reduce volatility and maximize returns by including assets with low or negative correlations.
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Staking is the process of locking up a certain amount of cryptocurrency in a Proof-of-Stake (PoS) network to support its operations, such as validating transactions and securing the network. In PoS, validators are selected to create new blocks and confirm transactions based on the amount of cryptocurrency they have staked. In return for their participation, stakers earn rewards, typically in the form of additional tokens. The more tokens staked, the higher the chance of being chosen as a validator. Staking incentivizes long-term holding and network security, and it helps PoS networks operate more efficiently and with lower energy consumption compared to Proof-of-Work (PoW) networks like Bitcoin. However, stakers face risks, including slashing (loss of staked funds) for malicious behavior or downtime.
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The Fear & Greed Index offers a snapshot of market sentiment, helping traders gauge whether the market is overly optimistic or fearful. When greed is high, it often signals an overbought market, possibly due for a correction. Conversely, extreme fear can indicate undervalued assets, presenting a potential buying opportunity. By using the index alongside technical analysis, traders can make more informed decisions, timing entry and exit points based on emotional extremes in the market. It’s a valuable tool for counteracting emotional bias and staying grounded during volatile periods.
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