Bitcoin Fear & Greed Index: Understanding Market Sentiment

The “Crypto Fear and Greed Index” is a tool for measuring the market’s status, mirrored after CNN Money’s fear and greed index for the S&P 500, which helps determine investor’s appetite for the stock market stocks.

CNN Money’s ‘Fear and Greed Index’

When CNN Money began implementing the F&G index, it was to help determine whether a stock market holds a “fair” valuation during any given time. It also helps realize that great investor fear drives down prices, while implying that excessive greed increases prices.

This led to the Bitcoin Fear and Greed Index (“BTC Fear and Greed Index) which mirrors CNN Money’s F&G index.

Source: Investingcube.com

The most important thing to take away from this index, is that it’s Bitcoin-focused, showing its overall volatility over a 30 and 90-day period. Since Bitcoin is arguably the industry’s premiere digital currency, all cryptocurrencies are (for the most part) correlated to Bitcoin’s overall performance, giving rise to the creation and desire for such an index.

If you’re new to crypto, particularly Bitcoin, anytime BTC price surges, most altcoins (any coin other than Bitcoin) tend to also increase in value. The same can be said when the price of Bitcoin drops.

And why is that? Speculation and fear. Which is what powers this BTC F&G Index. At its most basic level, this index measures how “overbought” or “oversold” the cryptocurrency market is, which reflects investors emotions through listed asset’s prices.

If the market is “overbought” and potentially ready for a sell-off, the index will reflect a ‘Greedy’ status.

In contrast, if the market is “oversold” and potentially offers a buying opportunity, the index will reflect “Fearful”.