The Crypto Fear and Greed Index is a valuable cryptocurrency market sentiment tool to identify fear or greed level in crypto investors. By just a glance at the indicator (index), investors can estimate if the crypto market price is driven by fear or greed and if it’s a good time to buy or sell cryptocurrencies. It’s also known as the Bitcoin Fear and Greed Index because it mostly tracks data on the most popular cryptocurrency – Bitcoin. Check what’s the BTC fear and greed index today below.
Crypto Fear and Greed Index Today
The cryptocurrency market is very volatile and so is the crypto FGI. If you’re trading cryptocurrencies often, it may be useful to follow the index daily. The gauge meter below shows the cryptocurrency market Fear and Greed index today. We update the index daily so that you could follow the latest market sentiment live.
Bitcoin Fear and Greed Index Today (Live)
Bitcoin FGI index on December 1, 2021.
|Bitcoin FGI Today||Value||date|
Cryptoassets are a highly volatile unregulated investment product. No EU investor protection. Your capital is at risk.
Please note, some tools mark ‘Greed’ and ‘Extreme Greed’ green. We believe that these are stages when buying cryptocurrencies might come with increased risk. Though, it may be an excellent time to sell. These are not recommendations, but our approach to reading the crypto fear and greed index live data.
|Crypto FGI Values||Market Sentiment|
|0 – 25||Extreme Fear|
|26 – 46||Fear|
|47 – 54||Neutral|
|55 – 75||Greed|
|76 – 100||Extreme Greed|
If you see that the crypto market is driven by fear, you may head to your crypto trading platform and consider buying because other investors are fearful, and cryptocurrencies could sell for a lower price. On the flip side, if the crypto market is driven by greed – be careful with buying. Now, let’s dive into what’s the Crypto Fear & Greed Index, how is it calculated, what’s the index today and over time?
What is Crypto Fear And Greed Index?
Crypto Fear and Greed index is a financial strategy used to time the market by understanding how investor emotions influence their decisions regarding crypto investment. CNN Money initially developed the Fear and Greed Index (FGI) as a general market-timing tool to understand how investor emotions influence stock market investment decisions. However, the Fear and Greed Index has found its way into the crypto market as a critical component that helps determine whether it’s bullish or bearish. The term was coined to help investors avoid emotional overreactions when investing in cryptocurrency.
Theoretically, Crypto FGI can be used to gauge whether the pricing in the crypto market is favourable. The index analyzes and measures sentiments surrounding cryptocurrency trends, mainly Bitcoin, from multiple sources. Just as the name suggests, FGI uses the two primary emotions of fear and greed to influence how much investors are willing to pay for crypto. Therefore, activating fear and greed has significant effects on cryptocurrency prices, market volatility, volume trade, and the general direction of the crypto market.
Crypto Fear And Greed Index over time – Historical data
How does the cryptocurrency FGI work?
The crypto FGI calculates investor sentiments on a scale of 0 to 100. 0 represents extreme fear, where investors become overly bearish. 100 represents excessive greed leading to investors getting excessively bullish. The meter tracks market price variations daily, weekly, monthly, and yearly.
The logic is that excessive fear tends to drive down crypto prices (Bear Run), while too much greed tends to drive the prices up (Bull Run). The result is that most investors get greedy when the market is on the Bull Run, which results in fear of missing out (FOMO). On the other hand, people rush to sell their coins in an irrational reaction when they see prices go down. Understanding how investors react emotionally provides an opportunity for intelligent investors to take advantage of the market situation by taking a logical position. For a smart investor, the index’s extreme sides can help make wise crypto investment decisions. When the index measures extreme fear, most people are selling. However, it could be the best opportunity to buy. On the opposite end, when the market shows extreme greed, it could be an excellent opportunity to take profit (sell).
Cryptoassets are a highly volatile unregulated investment product. No EU investor protection. Your capital is at risk.
How is Crypto Fear and Greed Index Calculated?
Let’s now look at how the crypto fear and greed index is measured or calculated.
Crypto Fear & Index may appear like describing the overall fear of the crypto market, but in reality, it measures mostly Bitcoin and not an entire crypto market. Nonetheless, Bitcoin tends to represent what is happening in the broader crypto market in terms of price movement and overall market sentiments. Therefore, it’s still relevant to other major cryptocurrencies like Ethereum, Solana, Cardano, Tether etc., and it doesn’t matter whether you trade cryptocurrencies on Revolut, Etoro or other platforms because it represents a market sentiment in general. Crypto Fear & Greed Index uses six indicators, often derived from both qualitative and quantitative measures. The indicators are volatility, Market momentum/volume, social media, dominance, trends, and surveys.
|Indicator||The value assigned||Explanation|
|Volatility||25%||Measures the current price of Bitcoin and compares it with 30 and 90-day averages. A sharp rise in volatility might mean the market is fearful.|
|Market momentum / Volume||25%||Market momentum uses a combination of current Bitcoin market volume and market momentum. It then compares it to the average of the last 30 and 90 days. A strong upward momentum may suggest a bullish market, while a strong downward momentum may suggest a bearish market.|
|Social Media||15%||Analyzes market sentiments based on the social media posts, Twitter hashtags, reactions on posts, etc. If the measured interactions increase sharply over a short period, it may be showing investor greed.|
|Dominance||10%||This indicator measures the Bitcoin market cap share from the entire crypto market cap. An increase in market cap dominance by Bitcoin may indicate reduced speculation for other cryptocurrencies. This may represent a bearish response from the investors. Conversely, decreased dominance by BTC may indicate a rise in speculations of other cryptocurrencies, which in turn, may suggest a bullish market response.|
|Trends||10%||The indicator looks at the Google Search trend data for Bitcoin and its related search terms/keywords. A rise in search volumes and recommendations from popular sites may trigger a bullish market.|
|Surveys||15%||This indicator is derived from a polling platform to see what individuals are thinking of the markets. NOTE: This indicator has been paused. It’s no longer used in the analysis.|
How to understand the Fear & Greed index?
To understand how the Fear & Greed Index concept works in the crypto market, let’s take a few case scenarios.
Example #1 – the Evergrande debt crisis in China
The recent developments in the financial market, the Evergrande debt crisis in China, and its implication on the crypto market. The Bitcoin Fear & Greed Index plunged to 21, leading to BTC dropping by $8,000 in just a few days. Bitcoin price fell to slightly below $40,000. As expected, the Bitcoin drop caused other altcoins to drop too, leading to significant sentiments in the crypto community.
Example #2 – extreme volatility in the crypto market
Notably, when Bitcoin experiences extreme volatility, the result can be very sharp but represent a brief change in the index. For instance, in the last week of February 2021, Bitcoin dropped by $12,000 (from $57,500 to about $45,100) within a week. In the next two weeks, the price had gone up past $60,000. The sudden drop and rise were severe, and the Crypto Greed & Fear Index dropped from 94 (extreme greed) to 38 (extreme fear) within a week.
On May 11, 2021, Bitcoin price was $57,000, and the Index stood at 61, representing “Neutral” and “Greed.” The following day, May 12, BTC fell by 13% to $49,500. It was a record 24-hour span fall, and by volume, one of the biggest in the history of crypto price falls. These flip flops between extreme greed and extreme fear have been going on for some time, to the point that Bitcoin experienced a 50% drop in May.
Crypto sentiment influence on the market
Theoretically, the Fear & Greed Index measures the behaviour of the crypto community towards Bitcoin. However, in reality, this measure crosses over to other digital assets.
Crypto sentiment analysis looks at how the crypto investors feel about the market at the time of research. It emerges from the sentiment analysis, which checks the user and customer demands, driven mainly by social media engagements. Are you fearful, greedy, or simply neutral about the crypto market events? The truth is, these emotions have a significant impact on the decisions investors make, even though they know the importance of technical and fundamental factors. In the crypto space, emotions run high and take centre stage when making investment decisions. Such actions lead to extremely high price volatility, which can be stressful for those who mistime the market but offers a greater opportunity to make money if you understand people’s emotions and master your own as well.
Does the Fear and Greed Index work?
Some academic research by behavioural economists has suggested that greed can interfere with our brain’s functionality by forcing it to ignore common sense and self-control. There could be no generally accepted research on the workings of greed. However, it’s been proven that fear and greed can become extremely powerful motivators in the investment circle. It’s because most investors are emotional with money, hence reactionary in the face of either fear or greed.
The history of fear and greed index analysis has reliably shown that they work in the equity market. For example, on September 17, 2008, the index dropped to a low of 12 when the S&P 500 fell to a 3-year low. Following the Lehman Brothers bankruptcy and the near-collapse of AIG. On the contrary, the index rose to over 90 in September 2012 following the quantitative easing by the Federal Reserve. It has also been shown in the crypto market how crypto FGI affects the crypto market. In addition to other tools, many pundits agree that the crypto FGI is a helpful indicator to make investment decisions.
Criticisms of the Fear & Greed Index
Just like any other tool, the Fear & Greed Index has faced some criticism in the face of its successful applications by investors. Critics argue that FGI is just a barometer for market timing. Instead, they encourage investors to embrace “buy and hodl” as it’s the best way to invest in the crypto market. However, while some investors prefer a buy-and-hold strategy, it must be noted that day trading is part of the reasons why crypto is growing, and such traders need the Fear & Greed Index to understand the market dynamics.
Crypto FGI may look different from the original FGI indicator developed by CNN Money. However, the two indices fundamentally employ the same principle to measure investor fear and greed levels by monitoring investor emotions.
Crypto Fear & Greed Index is a helpful tool for getting to understand the market sentiments. However, it can be misleading because no tool can predict the market in its entirety. If they could, everyone would use them, and the results would be counterproductive. That’s why we emphasize the need to do your own research to supplement these indices before buying any digital asset.
Crypto Fear & Greed Index is a helpful tool for getting to understand the market sentiments. The index theoretically represents how much investors are willing to pay for crypto. The higher the index, the more investors are willing to pay and vice versa.