Key points
The cryptocurrency fear and greed index measures sentiment in the crypto market on a scale from 0 to 100. This index is based on CNNMoney's 'Fear and Greed Index' designed to analyze the stock market.
Fear (from 0 to 49) indicates low prices and an excess supply in the market. Greed (from 50 to 100) suggests overvaluation of assets and a possible market bubble.
Significant changes in the level of fear and greed are important for trading strategy, especially when choosing the timing for entering or exiting the cryptocurrency market.
Introduction
A good trader or investor is always looking for additional information to rely on for decisions about buying or selling cryptocurrencies. There are many useful indicators: charts, fundamental indicators, market sentiment, and more. However, studying absolutely all available factors is not the most effective use of time.
Thus, the combination of sentiment and fundamental market indicators allows us to get an understanding of the level of fear and greed. However, one should not rely solely on this indicator. It should be used to better assess the overall sentiment in cryptocurrency markets.
What is an index?
The index combines several 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 largest companies in the United States. Investors can access their stocks by purchasing financial instruments based on the DJIA.
The fear and greed index is also a weighted measure of market data, but this is where the similarities end. This index is not a commodity or financial instrument. It is simply a market indicator that can help with analysis.
What is a market indicator?
Market indicators help traders and investors analyze data. There are three main types of indicators:
Technical analysis (TA): studies price movement, trading volume, and statistical trends using technical analysis indicators such as moving averages and Ichimoku clouds.
Fundamental analysis (FA): evaluates the intrinsic value of an asset based on factors such as user adoption and overall market capitalization.
Sentiment analysis: measures investor sentiment based on social media, community discussions, and public opinion.
The fear and greed index is far from the only market indicator. Other examples include Augmento's bull and bear index and WhaleAlert, which tracks large whale transfers in cryptocurrency markets. Crypto research largely relies on the analysis of social media, community, and public opinion. This is why sentiment analysis can be useful for cryptocurrencies.
What is the fear and greed index?
CNNMoney originally developed the fear and greed index to analyze market sentiment regarding stocks. Later, the website Alternative.me adapted it for the cryptocurrency market.
The fear and greed index analyzes various market trends and indicators to determine whether market participants are feeling greed or fear. A score of 0 indicates extreme fear, while 100 indicates extreme greed. A score of 50 shows that the market is relatively neutral.
High fear in the market indicates that cryptocurrencies are undervalued. This can lead to mass selling of currencies and excessive panic. However, fear does not necessarily mean that a long-term bearish trend is observed in the market. It should be seen as a short-term or medium-term snapshot of market sentiment.
Greed in the market is the opposite situation. If investors and traders are exhibiting greed, there is a likelihood of overvaluation and a market bubble. Imagine a situation where FOMO (fear of missing out) drives investors to stimulate the markets. Increased greed can lead to excessive demand, artificially raising prices.
How the cryptocurrency fear and greed index works
The index calculates a new value from 0 to 100 every day. As of March 2025, the cryptocurrency fear and greed index relies on data related to Bitcoin and other major cryptocurrencies. BTC significantly correlates with the cryptocurrency market as a whole when it comes to price and sentiment.
The index scale can be divided into several categories:
0–24: extreme fear (orange)
25–49: fear (yellow)
50–74: greed (light green)
75–100: extreme greed (green)
The index calculates its value by combining five market factors in specified proportions.
1. Volatility (25% of the index). Volatility reflects the average value of Bitcoins over the past 30 and 90 days. In this index, volatility is used as a substitute for market uncertainty.
2. Market momentum/volume (25% of the index). Current trading volume and market momentum are compared with previous averages over 30 and 90 days and then combined. Consistent large purchases indicate greed or positive market sentiment.
3. Social media (15% of the index). This factor analyzes the number of Bitcoin-related hashtags on X and their spread rate. Typically, unusually active dissemination of hashtags is associated with increased greed in the market.
4. Bitcoin dominance (10% of the index). This factor reflects BTC dominance in the market. An increase in market dominance indicates new investments and potential redistribution of funds from altcoins.
5. Google Trends (10% of the index). By analyzing Google Trends data on Bitcoin search queries, insights into market sentiment can be gained. For example, an increase in queries like 'Bitcoin fraud' or 'Bitcoin price manipulation' indicates heightened fear in the market.
6. Survey results (15% of the index). This parameter has not been used for some time and is currently suspended.
Can this index be used for long-term analysis?
This indicator is not very effective for long-term analysis of cryptocurrency market cycles. During bullish or bearish sentiments, the market goes through several cycles of fear and greed. These changes are usually beneficial for swing traders. However, investors who want to hold their funds will find it difficult to predict market changes from bullish to bearish based solely on this index. In such cases, it is likely necessary to analyze other market aspects to get a comprehensive picture and future trends.
We recommend not relying solely on one indicator or analysis style. Always conduct your own research (DYOR) before investing, and only invest what you are prepared to lose.
In conclusion
The fear and greed index is a simple way to gather and summarize a range of fundamental indicators, including market sentiment. You can also use the indicator to track social media, Google Trends, and other statistics, so you don’t have to collect this data yourself. If you do decide to include this indicator in your analysis, try to supplement it with other metrics to achieve the most balanced and objective result.
Recommended reading
5 key indicators used in technical analysis
What is market sentiment analysis in cryptocurrency?
The psychology of market cycles
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