Temps de lecture : 7 minutes

Fear & Greed Index: understanding crypto market sentiment

When it comes to analyzing the cryptocurrency market, one tool has particularly stood out in recent years: the Fear & Greed Index. This relatively new indicator has rapidly gained popularity as a means of measuring emotions and general sentiment surrounding cryptos, particularly Bitcoin. The Fear & Greed index assesses emotions in the cryptocurrency market, particularly for Bitcoin.

Let’s now find out more about the Fear & Greed indicator, how it works, its components and its relevance to crypto market analysis.

What is the Fear & Greed Index?

Cryptocurrency markets move at breakneck speed, and years in this space can seem like decades in traditional finance. It’s against this backdrop that the Fear & Greed Index was born in 2018. This initiative was born out of the Alternative.me platform, which specializes in solutions aimed at facilitating connectivity and interoperability between different softwares.

The main objective of this indicator is to quantify ambient market sentiment regarding Bitcoin and cryptocurrencies in general by measuring investors’ « fear » and « greed ».

BitDegree Crypto Fear and Greed Index

The Fear & Greed index has quickly become popular on Twitter and is followed by over 650,000 people. It is frequently cited in articles, media and discussions related to Bitcoin and Altcoins, making it a widely recognized index in the crypto ecosystem.

The components of the Fear & Greed Index

The Fear & Greed index is based on a scale of values from 0 to 100, where the lowest number represents extreme fear and the highest indicates extremely high confidence. Although its presentation is simple, the underlying mechanisms of this indicator are more complex. It is based on five main data sources:

Volatility (25%)

Bitcoin’s volatility is a key factor measured by the index. It takes into account rapid price variations, as well as retracements, and compares them with the average over the last 30 and 90 days. A sudden rise in volatility is generally interpreted as a sign of a fearful market.

Market Momentum / Volume (25%) 

Market momentum, or the strength of a trend to spread, is assessed here. Daily buying volumes are also taken into account, by comparing them with their respective averages over the last 30 and 90 days. High volumes in a positive market may indicate overconfidence, or even euphoria.

Social networks (15%) 

Interaction around cryptocurrency-related hashtags on social networks, mainly Twitter, is analyzed to measure growing public interest. The speed of propagation of a hashtag and the resulting interactions (impressions, engagements, etc.) are taken into account.

Survey (15%) 

Although this component is currently suspended, it played a role in the development of the index. Weekly cryptocurrency polls were conducted in collaboration with strawpoll.com, providing a picture of investor sentiment. This helped launch the tool, although this source is no longer used today.

Dominance (10%) 

Bitcoin’s market share relative to other cryptocurrencies is measured in terms of market capitalization. A significant drop in Bitcoin’s dominance may indicate a growing interest in altcoins, while strong Bitcoin dominance may reflect a sense of security and caution.

Market phases

Based on the evolution of the Fear & Greed Index, it is possible to identify several distinct market phases:

Extreme fear phase

When the index reaches very low values, this indicates that investors are particularly fearful. In this situation, the market can be considered oversold, offering buying opportunities at low prices.

Moderate fear phase

With the index in the intermediate range between extreme fear and neutrality, the market is dominated by caution. Investors may be reluctant to make major transactions, leading to a slowdown in market activity.

Neutrality phase

When the index is around the median value of 50, this means that investors are relatively undecided between fear and greed. In this situation, the market is in equilibrium and may experience a period of stability.

Moderate greed phase

An index in the intermediate range between neutrality and extreme greed shows positive investor sentiment. This phase can be conducive to buying, with an increase in transaction volumes and a rise in prices.

Extreme greed phase

When the index reaches very high values, this means that investors are particularly optimistic and confident. However, this situation can be dangerous, as it can lead to an overpriced market and thus to a major price correction.

The impact of fear and greed on crypto movements

Fear and Greed Index
Fear and Greed Index on BitDegree

Emotions play a crucial role in investment decisions and can have significant effects on crypto market movements. Among the most influential emotions in this context, therefore, are fear and greed.

These two sentiments are often seen as the main driving forces behind market fluctuations.

Fear: a brake on investment

Fear is an emotion that can make investors cautious and risk-averse. This attitude can manifest itself in different ways:

How to manage fear as an investor

To minimize the impact of fear on their investment decisions, investors can adopt several strategies:

Greed: pushing investors to take too much risk

Like fear, greed can have adverse consequences on investment decisions and market movements. Here are just a few of the ways in which greed can affect investment decisions:

How to avoid greed as an investor

To avoid giving in to greed, here are a few tips to follow:

How to use the Fear & Greed index for your investments?

While the Fear & Greed index can obviously offer useful pointers for newcomers to the world of cryptocurrencies, it can also be used as a decision-making tool for all investors, whatever their experience. By observing the evolution of this index, it is possible to anticipate market trends and adapt one’s strategy accordingly.

Take advantage of the opportunities offered by fear

When the index indicates a high level of fear, this can represent an opportunity for investors on the lookout for bargains. Indeed, a market dominated by fear is often synonymous with falling prices, making it possible to buy cryptocurrencies at lower cost.

Caution in the face of greed

Conversely, when a high level of greed is detected, it may be wise to exercise caution and not rush into purchases. A market strongly influenced by optimism and confidence can quickly tip over, leading to a sharp price correction.

In short, the Fear and Greed Index in the cryptocurrency sector is a valuable tool for investors wishing to better understand how the market works and adapt their strategy according to the emotions that dominate it.

Can the Fear & Greed index be used to analyze other cryptocurrencies?

Although the index focuses primarily on Bitcoin, its calculation method could be adapted to analyze other cryptocurrencies. For example, there is a Fear & Greed index for Ethereum which follows a similar approach.

What are the limitations of the Fear & Greed index?

The Fear & Greed index represents a snapshot of market sentiment and does not predict future trends. It may also show its limitations for seasoned investors, but remains a useful tool for beginners.

How could the Fear & Greed index be improved?

To be even more effective, the indicator could take into account more social networks and negative signals, such as pessimistic phrases in Google searches or hashtags. A more in-depth analysis of these elements could provide more accurate information on market sentiment.


Fear and greed are two powerful emotions that can influence investor behavior and market movements. The Fear & Greed Index has rapidly established itself as an essential tool for assessing overall cryptocurrency market sentiment. This indicator offers a snapshot of the market, but it does not predict future trends. Ultimately, by combining a variety of data and analysis, investors can better understand the market climate and make informed decisions, while keeping their emotions in check with this powerful analysis tool.