Crypto Fear and Greed Index

Why Measure Fear and Greed?

The cryptocurrency market is highly influenced by human emotions, particularly fear and greed. When the market is rising, people tend to become greedy, driven by the fear of missing out (FOMO). Conversely, when the market experiences a downturn and prices start dropping, individuals often react irrationally out of fear and sell their coins. At our platform, we recognize the impact of these emotional reactions and aim to help users avoid making impulsive decisions. Our Fear and Greed Index provides a valuable tool for assessing the sentiment in the crypto market.

Understanding the Index:

The Fear and Greed Index is a simple meter that ranges from 0 to 100, indicating the current sentiment in the Bitcoin market. A reading of zero represents "Extreme Fear," while a reading of 100 signifies "Extreme Greed." The index is derived from an analysis of various factors, as explained below.

Data Sources:

We gather data from five different sources, assigning equal importance to each data point in order to present a meaningful representation of the sentiment change in the crypto market.

1. Volatility (25%): We assess the current volatility and maximum drawdowns of Bitcoin, comparing them with the average values observed over the past 30 and 90 days. Unusual spikes in volatility often indicate a fearful market sentiment.
2. Market Momentum/Volume (25%): By analyzing the current volume and market momentum of Bitcoin and comparing them with the average values of the past 30 and 90 days, we gain insights into market behavior. When we observe high buying volumes on a daily basis during a positive market trend, it suggests an overly greedy or excessively bullish market.
3. Social Media (15%): While the live index does not include sentiment analysis from Reddit, we incorporate Twitter analysis. We collect and count posts related to various hashtags for each coin, with a focus on Bitcoin. We also examine the speed and volume of interactions these posts receive within specific timeframes. Unusually high interaction rates indicate a growing public interest in a coin, reflecting a greedy market sentiment.
4. Surveys (15%) - currently paused
5. Dominance (10%): Coin dominance refers to the market capitalization share of the entire crypto market held by a specific coin. For Bitcoin, an increase in dominance suggests a fear-driven reduction in speculative alt-coin investments, as Bitcoin becomes a safer haven in the crypto world. Conversely, a decrease in Bitcoin dominance indicates a greed-driven shift towards riskier alt-coins, with investors hoping for significant gains in the next bull run. When analyzing dominance for a coin other than Bitcoin, one can interpret the opposite effect, as greater interest in an alt-coin may indicate bullish or greedy behavior specific to that coin.
6. Trends (10%): We utilize Google Trends data, focusing on various Bitcoin-related search queries. We analyze the change in search volumes and identify currently popular searches recommended by Google. For example, a substantial increase in the search query "bitcoin price manipulation" indicates fear in the market. We incorporate these trend insights into our index.

By considering these factors and calculating the index, we provide users with a comprehensive understanding of the fear and greed dynamics in the crypto market. It serves as a valuable resource for making informed investment decisions.

Source: Alternative.me Crypto Fear and Greed Index