FEAR & GREED INDEX
The Crypto Fear & Greed Index score for Bitcoin and other large cryptocurrencies
What is the Crypto Fear & Greed Index
One of the ways to gauge market sentiment within the cryptocurrency space is with the Crypto Fear and Greed Index. This index is a daily snapshot of the general market “emotions” within the crypto sector.
How to read the Crypto Fear & Greed Index chart
The values on the Fear and Greed Index range from 0 (extreme fear) to 100 (extreme greed).
The score on the chart is interpreted as follows:
- 0-24 = Extreme Fear
- 25-49 = Fear
- 50-74 = Greed
- 75-100 = Extreme Greed
It can be argued that when the market is approaching or in the “extreme greed” zone that traders are getting too greedy and market is overdue for a correction.
Likewise it can be argued that when market is in the “extreme fear” zone that traders are being too fearful and we might be reversing soon.
How is the Crypto Fear & Greed Index calculated
The index is calculated daily using a collection of different weighted factors that include volatility, market volume, social media, dominance, and trends that are scraped from a variety of sources across the internet. After the index score is compiled each day, it’s then plotted on a 0-100 graph with ratings
How to use the Crypto Fear & Greed index for trading
As a general rule the following two trading strategies can be applied:
Fear & greed index < 20 = Buy
Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
Fear & Greed index >80 = Sell
When investors are getting too greedy, that means the market is due for a correction.
Using the Fear & Greed Index as an analytical tool
When doing your own research its’ important to keep in mind that no single investment model is accurate 100% of the time. While the index is a useful tool, it’s only a single data point. However, it can be a resource to help you more clearly navigate the crypto markets rationally when asset prices are either pumping to new highs or dumping to new lows.
The index seeks to remove emotional overreactions and enable crypto investors to make a more rational decision within a market segment that’s more volatile and irrational than other markets.
Contrarian investors tend to do the opposite of what “herd mentality” investors do as an intentional strategy. Typically, the average investor gets greedy when the market is rising, resulting in FOMO (fear of missing out) — which is usually the wrong time to buy in.
Similarly, average individual investors tend to hold assets for too long thinking the price will rebound to the highs they saw when they bought. That’s completely opposite to what smart contrarian investors do.
The index helps remove emotional overreactions to help investors maximize the investing axiom: “buy low, sell high.”