What is the Crypto Fear and Greed Index?

The Crypto Fear and Greed Index evaluates the sentiment of the crypto market on a scale of 0 to 100. It is derived from the CNNMoney Fear and Greed Index, which analyzes the stock market. It’s an answer of the question “What is the Crypto Fear and Greed Index?”

A score of 0 to 49 indicates fear, indicating that the market is undervalued and there is an excess supply. On the other hand, a score of 50 to 100 suggests greed, indicating an overvaluation of cryptocurrencies and a potential bubble.

Observing changes in the levels of fear and greed can be incorporated into your trading strategy when deciding whether to enter or exit the crypto market.

How does the Crypto Fear and Greed Index work?

You can divide the index’s scale into the following categories:

  • 0-20: Extreme fear (Red)
  • 21-40: Fear (Orange)
  • 41-60: Neutral (Yellow)
  • 61-80: Greed (light green)
  • 81-100: Extreme greed (green)

The index calculates the value by combining five different weighted market factors:

  • Price momentum: It analyzes the price performance of the top 10 crypto coins (excluding stablecoins) by market capitalization, including BTC, ETH, XRP, BNB, and DOGE, in order to capture the trends across a broader range of assets.
  • Volatility: The index incorporates the Volmex Implied Volatility Indices, BVIV and EVIV, which provide forward-looking measures of annualized expected volatility over 30 days for BTC and ETH.
  • Derivatives market: The index uses Glassnode Options Open Interest Put/Call Ratio data on Bitcoin and Ethereum options contracts to indicate investor sentiment over a moderate time frame. A higher ratio of puts to calls indicates fear, suggesting bearish expectations.
  • Market composition: The relative aggregate value of BTC in the market serves as a vital indicator of market sentiment. The stablecoin supply ratio (SSR) is employed for this purpose, measuring the ratio between Bitcoin’s market capitalization and the total market capitalization of major stablecoins.
  • Proprietary datanswer: The index analyzes social trend keyword search data and user engagement metrics to gauge market sentiment, retail interest, and emerging trends. This information identifies the coins and projects generating the most interest and the themes driving market sentiment.

How can I use the Crypto Fear and Greed Index?

In this article, I will use the CMC Crypto Fear and Greed Index. So the market’s mood is evaluated using the fear & greed index. It acts as a sentiment indicator, allowing users to understand the emotional biases of the entire market. This helps them make more objective decisions. When used alongside other analytical tools, the Index becomes a valuable resource for measuring market sentiment and making well-informed choices.

Conclusion

The Crypto Fear and Greed Index simplifies the process of collecting and summarizing various fundamental and market sentiment metrics. Instead of doing it manually, you can depend on this indicator to monitor social media, Google Trends, and other statistics. To enhance your analysis, you may want to combine it with other metrics and indicators for a more well-rounded perspective.