The Fear & Greed Index is an indicator that measures the overall sentiment of the cryptocurrency market on a scale of 0 to 100. A value of 0 indicates extreme fear, while 100 represents extreme greed.
How is it calculated?
The index combines several factors:
Volatility (25%): Compares current volatility with the 30 and 90 day averages.
Market momentum (25%): Compares current volume with recent averages.
Social media (15%): Analyzes mentions and sentiment on platforms like Twitter.
Bitcoin dominance (10%): High dominance can indicate fear (refuge in BTC).
Google Trends (10%): Crypto-related searches.
How to interpret it?
0-25 (Extreme Fear): Investors are selling in panic. Historically, these levels have offered good long-term buying opportunities.
26-46 (Fear): Widespread caution in the market.
47-54 (Neutral): The market is undecided.
55-75 (Greed): Growing optimism, rising prices.
76-100 (Extreme Greed): The market may be overheated. Historically precedes major corrections.
Remember: this indicator is one tool among many, not a buy or sell signal on its own.