What Is the Fear & Greed Index?
The Fear & Greed Index is a daily composite metric that gauges the overall emotional state of the crypto market. It ranges from 0 (Extreme Fear — investors are very worried) to 100 (Extreme Greed — investors are very bullish). The index aggregates multiple data sources including volatility, market momentum, social media, surveys, dominance, and trends.
How the Fear & Greed Index Works
The index weighs several components:
- Volatility (25%) — Unusual volatility = fear
- Market momentum/volume (25%) — High buying volume = greed
- Social media (15%) — Sentiment and engagement metrics
- Surveys (15%) — Polling data from market participants
- Bitcoin dominance (10%) — Rising dominance = fear (flight to safety)
- Google Trends (10%) — Search interest for crypto terms
Why It Matters for Traders
The index is primarily used as a contrarian indicator. Warren Buffett's famous "be fearful when others are greedy, and greedy when others are fearful" applies directly. Extreme Fear readings (below 20) have historically aligned with market bottoms, while Extreme Greed readings (above 80) often precede corrections.