In the filed of crypto it has always been a matter of great significance to discuss the sentiment of the market. Before buying or selling it is necessary to get the overall data of the market to make better decisions. A good trader is the one who always tries to find out data of the market first and then invests in it according to the sentiments of the market. An investor can collect data by looking at certain charts, by analysing the fundamentals of the market data and by considering the sentiment of the market. It is not wise to study every index and metric as it is a lengthy process and consumes a lot of time.
A trader can get data of market fear and greed in a glance with the crypto Fear and Greed index. The data got by the Crypto Fear and Greed index can tell the story of the cryptocurrency market. One should not rely on a single indicator as the data collected by a single indicator can be faulty or incorrect at times.
What Is an Index?
An index aggregates data from multiple points into one statistical measure. For instance, by reading the prices of 30 U.S. companies the Dow Jones Industrial Average (DJIA) tracks the stock market. By purchasing DJIA related financial instruments a trader can get the knowledge of these stocks and can make a better decision about his investment.
The crypto Fear and Greed Index is not a financial instrument rather it is just an indicator which helps in the analysis of the present condition of the market. It is not something which can be bought for personal use.
What Is a Market Indicator?
Traders use these indicators to analyse the market data. These indicators help the investors more effectively and make them able to assess the prevailing situation of the market. These indicators exist in 3 forms:
- Technical Analysis (TA): Technical Analysis is used to inspect trading volume and price movement. It also uses Technical Analysis like moving averages (MA) and Ichimoku Clouds.
- Fundamental Analysis (FA): Fundamental Analysis is used to inspect intrinsic value of an asset. It does so by inspecting certain factors like users adoption and total market capitalization.
- Sentiment Analysis: Social media plays key role in measuring the sentiments of the investors. They share their thoughts and opinions on social media apps related to the situation of the current market. In this way social media plays vital role in knowing the sentiments of the traders. Moreover, Community discussions & public opinion are also considered the significant in this regard.
The Bull and Bear Index from Augmento and WhaleAlert, tracks huge transfers from whales in cryptocurrency markets. Social media does play a significant role in analysing the sentiments of the traders. Almost the whole world is on social media and every one can express his opinion on any social media app. In this way, Crypto research heavily relies on social media, community and public opinion.
What Is a Fear and Greed Index?
In order to analyze stock market sentiment CNNMoney developed the Fear and Greed index. It was later adopted by Alternative.me, a website, for the crypto market.
Basically, different trends and market indicators are assessed by The Crypto Fear and Greed Index in order to know behaviour of the participants. Through this analysis it is determined whether the participants are feeling fearful or greedy. A score of zero on the indicator shows extreme fear, while a score near 100 shows extreme greed. Moreover, 50 score shows the market is neutral.
A fearful market indicates that the cryptocurrencies are undervalued. This very fear ultimately leads towards overselling. Excess panic by the traders create fear in them and they start overselling their asset. This fear does not lead the market to long term bearish trend rather it just shows the overall market sentiment.
Greed leads the investors towards overvaluation and a market bubble. As we see in a FOMO situation the investors pump the markets. As the greed increases, the demand also increases which creates inflation in the price.
How Does Fear and Greed Index Work?
This index calculates new values from 0 – 100 every day. As of April 2025, the Crypto Fear and Greed Index mostly uses data related to Bitcoin ($BTC) and altcoins. The reason is Bitcoin’s significant correlation with the cryptocurrency market as a whole when it is about price and market sentiment.
Index’s scale is divided into 4 following categories:
- 0-24 anything in this range shows extreme fear (orange color)
- 25-49 this range shows less fear (amber/yellow color)
- 50-74 this range shows greed (light green color)
- 75-100 this range shows extreme greed and FOMO (green color)
The Greed and Fear index calculates the value by using 5 different weighted factors.
1. Volatility (used for 25% index score). Volatility measures the present value of BTC with the moving averages from the last 1 to 3 months. Fear and Greed index uses volatility as a stand-in for measuring uncertainty in the crypto market.
2. Market momentum/volume (used for 25% of the index). The overall trading volume and market momentum are compared with the last 1 to 3 month average values combined. Constant high trading volume suggests positive and greedy sentiment.
3. Social media (used for 15% data). This factor takes into account the number of X (formerly Twitter) hashtags related to $BTC and its overall interaction rate. Constant and high number of interactions means greed in the market.
4. Bitcoin dominance (used for 10% data). This input measures Bitcoin’s dominance in the market (BTC.D). Increased dominance in the market shows the new investment and re-location of funds from altcoins.
5. Google Trends (used for 10%). The index uses Google Trends data for BTC-related search queries. With this, the index provides insights into market’s sentiment. For instance, a rise in “btc scam” or “$BTC manipulation” searches indicate fear in the market.
6. Survey results (used for 15%). This input is paused at the moment for some time.
Can This Index be Used for Long-Term Analysis?
It is a matter of great experience to predict bearish or bullish momentum of the market. However, it is not wise to use an Index for Long-term analysis. Market cycles and sentiment do change rapidly, this is why it is difficult to rely on one single Index for a longer period. Moreover, a trader should rely on one’s own research for better results.
Conclusion
In order to know about the market sentiment metrics, the crypto Fear and Greed Index is a simple index to gather data in this regard. Although one can use his own research for market sentiment analysis, he should also use these indicators for better results.
