What is the Crypto Fear and Greed Index?
 

What is the Crypto Fear and Greed Index?


What does extreme fear mean in crypto?

While it's hard to anticipate the future movements of crypto assets with 100% accuracy, indicators like the Fear and Greed Index can help.

The Crypto Fear and Greed Index generates a single value between 1 and 100. If the value = 1, it means that the crypto market will fall as people are experiencing severe fear and selling their holdings.

On the other hand, a higher number of 100 means that the market is due for a correction, and people are experiencing excessive greed (i.e., buying more assets). So, how does the Crypto Fear and Greed Index work?

Extreme fear arises when the value of the index lies between 0 and 24. Anything above 24 and under 50 represents fear, and the value of 50 means neutrality in the market. On the contrary, greed arises when the value of the index lies between 51 and 74; however, if the value hikes over 74, such as 75 or above, it represents extreme greed.

Emotions drive the cryptocurrency market. When the market rises, people become greedy, resulting in the fear of missing out (FOMO). Also, when people see red numbers, they frequently sell their coins as an impulsive reaction.

How is the Crypto Fear and Greed Index calculated?

Various Crypto Fear and Greed Index signals that influence the behavior of traders and investors include Google trends, surveys, market momentum, market dominance, social media, and market volatility.

To determine how much greed is trending in the market, examine trending search phrases. For instance, a high volume of Bitcoin-related searches means a high degree of greed among investors. This factor accounts for 10% of the index value. Historically, increases in Bitcoin-specific Google searches have been correlated with extreme volatility in crypto prices.

To calculate the number each day, the Bitcoin Fear and Greed Index considers a few other factors, such as surveys, which account for 15% of the index value. Surveys with participants of over 2000 drive the index value higher, indicating the presence of greedy investors.

Created on 18th Mar 2022

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