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General information

The Fear and Greed Index is an indicator that provides an assessment of cryptocurrency market sentiment. The indicator was created based on the CNNMoney "Fear and Greed Index," which is used to evaluate the stock market.

The scale has values from 0 to 100. If the arrow drops below 49, the indicator points to negative market sentiment and an oversupply. When the arrow rises above 50, the indicator signals greed in the market and the possible formation of a financial bubble.

How does the "Fear and Greed Index" work?

At the moment, the indicator works only with BTC, which is the locomotive of the entire cryptocurrency market. It calculates a new value from 0 to 100 every day.

The indicator's scale is divided into several categories:

  • 0-24: extreme fear
  • 25-49: fear
  • 50-74: greed
  • 75-100: extreme greed

The indicator's values are calculated from a combination of fundamental and technical factors, each of which has its own coefficient of influence on the reading. Let's take a look at these factors:

  1. Market volatility (coefficient: 25%). Volatility is taken from the average price of BTC over the last 30 and 90 days.
  2. Momentum and trading volumes (coefficient: 25%). Momentum and trading volumes are compared with previous values over 30 and 90 days, then combined. If there are massive purchases on the market, this indicates greed and characterizes a positive mood among investors.
  3. Social activity (coefficient: 15%). The indicator tracks the number of hashtags related to BTC on Twitter. A strong increase in social activity usually indicates heightened greed.
  4. BTC dominance (coefficient: 10%). The indicator tracks the dominance of BTC over the rest of the cryptocurrency market. Growth in dominance indicates the appearance of new buyers on the market and/or a redistribution of funds from altcoins.
  5. Google Trends (coefficient: 15%). Analysis of Google Trends data on search queries related to BTC, which also makes it possible to gauge sentiment on the cryptocurrency market.

Conclusions:

The Fear and Greed Index combines several fundamental and technical factors, merging them into a single index, which makes market analysis easier and provides a general understanding of sentiment. Thus, by using this indicator, you can save time and avoid tracking all of these metrics separately.

Remember, no single indicator can show the perfect entry or exit point for the market, but it can be used as one of the reference points when making decisions.