Participants in the crypto market tend to react irrationally to price movements. The Fear and Greed Index in cryptocurrency highlights the community’s overall sentiment and helps traders make more considered decisions when emotions take over.
This article explains what the Fear and Greed Index is, how it is measured, and which resources provide the most accurate analytics.
What is the Crypto Fear and Greed Index
The Fear and Greed Index — also known as the Crypto or Bitcoin Fear and Greed Index — is a measure of two core emotions that drive investors in the market and affect how much they are willing to pay for cryptoassets. These emotions are fear of missing out (FOMO) and panic caused by sharp declines in cryptocurrency prices.
The measure was first used by the CNNMoney project to gauge stock market sentiment. The cryptocurrency fear and greed index serves the same purpose. Specialised tools track daily, weekly, monthly, and yearly fluctuations in the cryptocurrency market, assess sentiment across the community, and provide data that investors use to judge whether prices are fair.
During periods when the Crypto Fear reading rises or hits an extreme, investors tend to sell assets because they fear a deeper collapse in price. In such situations, assets can be available to buy at a discount.
A greed reading indicates that buying interest is increasing. Holders may take profit or sell cryptocurrency at higher prices. Analysts note that the highest greed readings can precede a “bubble”.
Equity and bond traders are often sceptical about this kind of analytical tool. The view is that such data supposedly encourages investing based on market timing while ignoring a straightforward “buy and hold” strategy.
Why measure it and where it is used
The scale of the Fear and Greed Index in cryptocurrency was created by Gregor Krambs and Victor Tobis. They adapted CNN’s tool to Bitcoin’s characteristics and to the market’s sentiment towards the asset.
Most often the gauge is shown as an arc with a pointer. The colour of the arc is a gradient from bright red to bright green.
The index is measured on a scale from 0 to 100:
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0–24 — extreme fear;
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25–49 — decreasing fear;
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50 — neutral sentiment;
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51–74 — rising greed;
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75 and above — extreme greed.
For a crypto holder, this reading provides an understanding of the market’s emotional state at the present moment. The index analyses Bitcoin only. As the most popular digital asset globally, with which most altcoins correlate, the data can still be useful for those investing in other coins.
Inputs used to determine the Fear and Greed Index
The CNN Fear and Greed Index for stock markets accounts for seven indicators:
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demand for junk bonds;
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market momentum;
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market volatility;
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put and call options;
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demand for safe havens;
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breadth of share price moves;
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relative strength.
For equities and bonds, each fear and greed parameter carries equal weight (per cent) when determining the final reading.
To calculate the Fear and Greed Index in cryptocurrency today, it is generally sufficient to evaluate just four to five inputs. Some of these are not related to stock markets or to traditional trading concepts.
How the Fear and Greed Index is calculated
Index calculators collect data daily across several criteria, combine them, and compute a current reading from 0 to 100. The weight of each parameter in the final figure is set according to its influence on Bitcoin’s price formation and is expressed as a percentage share out of 100.
Below are the five main parameters used to compute the index. The final number is the indicator of traders’ sentiment.
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Volatility accounts for 25% of the index. It measures Bitcoin’s current price and compares it with the averages over the previous 30 and 90 days. In the index, volatility is used as a proxy for fear in the market.
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Market volume — 25%. Current BTC trading volume and momentum are compared with the 30- and 90-day averages and the results are combined. An upward trend indicates bullish market sentiment.
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Social media — 15%. The analysis includes tweets, posts, comments, and hashtags on platforms such as Twitter, Reddit, and others that mention Bitcoin and other cryptocurrencies.
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Dominance — 10%. This shows Bitcoin’s total market capitalisation relative to the capitalisation of all other digital assets. The higher BTC’s share, the lower the level of speculation in altcoins. This can reflect a bearish trend.
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Search trends — 10%. Tools collect data on users’ top queries related to Bitcoin from Google, Yahoo, Bing, and other search engines. This helps gauge wider public interest in cryptocurrencies.
A further 15% of the index may come from poll and survey results on platforms that ask users about crypto markets in general or about specific assets.
Fear and Greed Index: where to view it online
Search engines return many pages that provide the latest Bitcoin fear and greed index and sentiment data for cryptocurrencies and other high-demand digital assets.
Below are the three most popular projects:
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Alternative.me. This is the first indicator adapted to crypto by Krambs and Tobis.
The official website and app offer live analytics and a chart of index changes over a selected period. The same tool is integrated on Coingecko with a detailed explanation of the mechanics and a user guide.
The index interface looks like this:
2. CryptoCurrencyTracker. According to the developers, the site presents accurate data gathered from exchanges, forums, blogs, social media accounts, apps, and other platforms that can influence market sentiment. The dataset is analysed in real time and presented as an online fear and greed index. Their cryptocurrency charts look like this:
3. On BTC Tools the instrument looks somewhat different. To calculate the index, the platform collects data from just four sources (historical data, exchanges, social networks, and search engine data). Unlike the two platforms above, the readings here are updated every eight hours.
The final readings of the fear and greed index in cryptocurrency are easy to understand without specialist technical knowledge. This analytical tool is useful for grasping overall market sentiment and for deciding whether to buy, hold, or sell assets in the current period.
However, the index is less informative for long-term analysis. To forecast a trend, you will need to combine analytics from other tools and carry out DYOR (do your own research).
