The Bitcoin Fear and Greed Index is a popular tool that measures the overall sentiment and emotions surrounding the cryptocurrency market. It was first introduced by Alternative.me in 2018 and, as its name suggests, the index aims to capture the fear and greed of Bitcoin investors and traders by analyzing a range of factors.
The index is calculated on a scale of 0 to 100, with a score of 0 indicating “extreme fear” and a score of 100 indicating “extreme greed.” Its score is calculated based on various metrics such as price volatility, trading volume, social media sentiment, and Google Trends data.
The higher the score, the more optimistic investors are about the market, and the lower the score, the more pessimistic they are.
In total, the five factors comprising the index are weighted as the following:
- Volatility (25%)
- Market Momentum/Volume (25%)
- Social Media (15%)
- Dominance (10%)
- Trends (10%)
*Surveys (15%) are currently paused from the list of factors.
The main indicator within the index is price volatility, which measures the magnitude of price swings in the market. If the market is experiencing high volatility, the fear index will increase, meaning that investors are feeling more anxious and fearful about the market. Conversely, if the market is stable, the index will be lower, suggesting that investors are feeling more optimistic and greedy.
Another key indicator that the index uses is trading volume. When trading volume is high, it indicates that there is a lot of interest in the market, which can lead to higher prices. If trading volume is low, it means that there is less interest in the market, which can lead to lower prices.
The index also factors in social media sentiment and Google Trends data to gauge the overall sentiment of the market. If social media sentiment is positive and Google searches for Bitcoin are high, it suggests that investors are feeling bullish about the market. Conversely, if sentiment is negative and searches for Bitcoin are low, it indicates that investors are feeling bearish.
The highest rating was on June 29th, 2019, with a Greed Score of 95. During this time, the Facebook Libra project hype was luring in risk-takers while the price was climbing to incredible heights before sharply correcting.
The lowest rating was on June 19th, 2022, when Bitcoin’s price dipped below USD$20,000 for the first time since December 2020.
The Bitcoin Fear and Greed Index Twitter account has over 670,000 followers and posts daily with the current day’s rating.
While the Bitcoin Fear and Greed Index is a useful tool for understanding the overall sentiment of the market, it is important to remember that it is just one indicator among many. Investors should always do their own research and analysis before making any investment decisions.