Bitcoin Fear And Greed Index

What is the Bitcoin Crypto Fear And Greed Index?

The Bitcoin Crypto Fear and Greed Index is a tool that helps investors and traders analyse the market from a sentiment perspective. It identifies the extent to which the market is becoming overly fearful or overly greedy.

The idea being that when the market is generally overly fearful, it may indicate that Bitcoin is cheap/undervalued at that time and could present a good buying opportunity.

The reverse also applies, so when the Fear and Greed Index is signalling market participants are extremely greedy, it may indicate the price of Bitcoin is too high above its intrinsic value and it could be a good time to sell.

Why is it useful for Bitcoin Investors and Traders?

Understanding the scores from the Index could present an opportunity to the astute investor to buy when the market is overly fearful and sell when the market is extremely greedy.

It therefore can act as a useful emotional management tool, allowing the investor to separate their own emotions from the rest of the market. This is especially the case when it is used alongside other tools that use different data inputs from the market, many of which can be found here.

Using the Index Scores

The Index is on a simple 0 to 100 scale and colour coded accordingly where 0 is blue and 100 is red.

When the score is red and close to zero this signals extreme fear and could indicate that many Bitcoin ($BTC) investors are too concerned about the price dropping further.

When the score is green and close to 100 this signals extreme greed and could indicate that many investors of Bitcoin ($BTC) are too excited about the price of Bitcoin rising a lot further in the future.

How to interpret the chart

Above we not only show the Bitcoin index score but also overlay it on top of the price of Bitcoin on the chart. The benefit of this is that it allows you to see not only the current score, but also to see how the score has changed with price over time.

This adds a new, unique dimension to the Bitcoin Crypto Fear and Greed Index that allows investors to understand how the Index interacts with price historically.

We will continually update this live chart every day so you can come back to see how the Bitcoin Fear and Greed Index is changing alongside the price of Bitcoin over time.

Data Source Inputs For Generating The Chart

The inputs for the Bitcoin Fear and Greed Index are generated every day from several different sources. Each one is relevant in its own unique way.

They include:

Current volatility of $BTC price action, relative to the last 30 days and 90 days. Exceptional increases in volatility can sometimes be a sign of an overly fearful market.
Momentum and Volume, relative to the last 30 days and 90 days. Exceptionally high buying volume on a relative basis can indicate that the market is becoming overly greedy.
Social media sentiment analysis looking at sentiment type and volume at a given time relative to historical norms.
Dominance of Bitcoin relative to other cryptocurrencies.
Google Trends across a range of relevant Bitcoin search terms to identify strong periods of growth or decline in Google Search.

Fall Further Down The Rabbit Hole

If you would like to learn more about the Fear & Greed Index head over to Alternative.me where they also have general pricing information about Bitcoin and a range of other cryptocurrencies.

In addition to the Fear and Greed Index, other market sentiment charts that use alternative data sources can be found here. In particular, Relative Unrealized Profit / Loss specifically looks at sentiment and complements the above approach as it uses on-chain data, which the above approach does not.

H/t to @cryptopou for the chart view.

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