Key Takeaways
The Crypto Fear and Greed Index measures crypto market sentiment on a scale from 0 to 100. It’s based on the CNNMoney Fear and Greed Index, originally designed for stock market analysis.
Fear (a score of 0 to 49) indicates undervaluation and excess supply in the market. Greed (a score of 50 to 100) suggests an overvaluation of assets and a possible market bubble.
Noticing changes in the level of fear and greed can be useful in your trading strategy, especially when deciding to enter or exit the crypto markets.
Introduction
When deciding whether to buy or sell in the crypto markets, a good trader or investor will always look for supportive data. There are charts to look at, fundamentals to analyze, and market sentiment to tap into. However, studying every metric and index available isn't the most efficient use of time.
With the Crypto Fear and Greed Index, a combination of sentiment and fundamental metrics provide a glimpse of market fear and greed. While you should not rely on this indicator alone, it can help you figure out the overall feeling of the cryptocurrency markets.
What Is an Index?
An index aggregates multiple data points into a single statistical measure. For example, the Dow Jones Industrial Average (DJIA) tracks the stock market by weighing the prices of 30 major U.S. companies. Investors can gain exposure to these stocks by purchasing DJIA-related financial instruments.
The Crypto Fear and Greed Index is also a weighted measure of market data, but that's where the similarities end. The Crypto Fear and Greed Index is not something you can purchase or any kind of financial instrument. It’s just a market indicator that can complement your analysis.
What Is a Market Indicator?
Market indicators help traders and investors analyze data more efficiently. These indicators exist in three primary forms:
Technical analysis (TA): Examines price movements, trading volume, and statistical trends using TA indicators like moving averages and Ichimoku Clouds.
Fundamental analysis (FA): Evaluates an asset's intrinsic value by examining factors such as user adoption and total market capitalization.
Sentiment analysis: Measures investor sentiment through social media, community discussions, and public opinion.
The Crypto Fear and Greed Index is just one of many market indicators. Other examples include The Bull & Bear Index from Augmento and WhaleAlert, which tracks large transfers from whales in crypto markets. To an extent, crypto research relies heavily on analyzing social media, the community, and public opinion. So, sentiment analysis can come in handy when trading crypto.
What Is a Fear and Greed Index?
CNNMoney originally developed the Fear and Greed Index to analyze stock market sentiment. A website called Alternative.me later adapted it for the crypto market.
The Crypto Fear and Greed Index analyzes a basket of different trends and market indicators to determine whether the market participants are feeling greedy or fearful. A score of 0 indicates extreme fear, while 100 suggests extreme greed. A score of 50 shows the market is somewhat neutral.
A fearful market could be an indication that cryptocurrencies are undervalued. Too much fear in a market can lead to overselling and excess panic. Fear doesn't necessarily mean that the market has entered into a long-term bearish trend. Instead, you can think of it as a short or mid-term reference to overall market sentiment.
Greed in the market is the opposite situation. If investors and traders are greedy, there's a possibility for overvaluation and a market bubble. Imagine a situation where FOMO (fear of missing out) causes investors to pump the markets. The increased greed leads to excess demand, artificially inflating the price.
How Does the Crypto Fear and Greed Index Work?
Each day, the index calculates a new value from 0 to 100. As of March 2025, the Crypto Fear and Greed Index uses data related to Bitcoin and other major cryptocurrencies. The reason behind this is BTC's significant correlation with the crypto market as a whole when it comes to price and sentiment.
You can divide the index's scale into the following categories:
0-24: Extreme fear (orange)
25-49: Fear (amber/yellow)
50-74: Greed (light green)
75-100: Extreme greed (green)
The index calculates the value by combining five different weighted market factors.
1. Volatility (25% of the index score). Volatility measures the current value of Bitcoin with averages from the last 30 and 90 days. The index uses volatility as a stand-in for uncertainty in the market.
2. Market momentum/volume (25% of the index). The current trading volume and market momentum are compared with the previous 30 and 90-day average values and then combined. Constant high-volume buying suggests positive or greedy market sentiment.
3. Social media (15%). This factor looks at the number of X hashtags related to Bitcoin and its interaction rate. Typically, a constant and unusually high amount of interactions relates more to market greed than fear.
4. Bitcoin dominance (10%). This input measures BTC's dominance of the market. Increased market dominance shows new investment and the possible reallocation of funds from altcoins.
5. Google Trends (10%). By looking at Google Trends data for Bitcoin-related search queries, the index can provide insights into market sentiment. For example, a rise in "bitcoin scam" or “bitcoin price manipulation” searches would indicate more fear in the market.
6. Survey results (15%). This input is currently paused and has been for quite some time.
Can I Use the Index for Long-Term Analysis?
The indicator doesn’t work as well on long-term analysis of crypto market cycles. Within a bull or bear run, there are multiple cycles of fear and greed. These switches can be useful for swing traders. But, for investors who want to HODL, it will be difficult to predict the change from a bull to a bear market just by using the index. You will likely need to analyze other market aspects to get a long-term perspective.
As usual, the recommended advice is that you don't rely solely on one indicator or style of analysis. Make sure to do your own research (DYOR) before investing any money, and only invest what you can afford to lose.
Closing Thoughts
The Crypto Fear and Greed Index is a simple way to gather and summarize a whole range of fundamental and market sentiment metrics. Rather than have to do this yourself, you can rely on the indicator to track social media, Google Trends, and other statistics. If you want to include it in your analysis, consider complementing it with other metrics and indicators to get a more balanced view.
Further Reading
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