The correlation between different crypto assets impacts portfolio risk management by diversifying exposure. For example, Bitcoin and Ethereum tend to move in tandem during market rallies or crashes, while smaller altcoins might exhibit more volatility. Diversifying across assets with low correlation can reduce overall portfolio risk, but it also requires careful analysis of each asset's market behavior and fundamentals.
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A gas fee is a payment made to compensate for the computational energy required to process and validate transactions on the Ethereum network. When users send transactions or execute smart contracts, they pay a gas fee to Ethereum miners (or validators, in the case of PoS). The gas fee varies based on network congestion and the complexity of the transaction. During times of high demand, gas fees can spike significantly, making transactions more expensive. Gas fees impact the efficiency of Ethereum, especially for smaller transactions or applications with many interactions. Optimizing gas usage or using Layer 2 scaling solutions can help reduce costs.
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Market sentiment indicators like the Fear & Greed Index provide a snapshot of how investors feel about the market. When the index shows extreme greed, it suggests that prices may be inflated and due for a correction, signaling a potential selling opportunity. Conversely, high fear levels can indicate that assets are undervalued, offering buying opportunities. By combining the Fear & Greed Index with technical analysis, traders can time their market entries and exits more effectively, helping to avoid getting caught in emotional market swings.
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