What Is the Crypto Fear and Greed Index? Why Are There Many Versions? What Should You Be Aware of When Using It?

Investors often display greed during bull markets or in response to favorable  developments—such as Donald Trump's election as U.S. president. Conversely, during bear markets or in times of uncertainty, fear tends to dominate investor behaviour. This shift was particularly evident after Trump launched a wave of reciprocal tariffs across global markets. But what exactly do we mean by  “market greed” or “market fear”? And more importantly, how can market sentiment be  measured to help investors avoid the common pitfall of buying high and selling low? 

One widely used tool for this purpose is the Crypto Fear & Greed Index . This article explores the definition, underlying principles, practical applications, and key considerations when using this index.

The Crypto Fear and Greed Index is a sentiment indicator designed to capture the emotional state of market participants and determine whether the cryptocurrency market is becoming overheated (driven by greed) or undervalued (driven by fear). The index is scored on a scale from 0 to 100, with different values reflecting the following:

The Crypto Fear and Greed Index is a comprehensive tool derived from seven data sources. These include metrics such as price volatility, market trading volume, social media sentiment, Bitcoin dominance, and Google search trends. Each component captures a different aspect of market sentiment and is weighted accordingly:

There is no single, unified Crypto Fear and Greed Index. Various platforms, research institutions, and exchanges have developed their own versions, each differing in calculation methods, data sources, target audiences, and market coverage.

Here are the key versions of the index and their differences:

Based on the index values, market sentiment can be classified into five levels—Extreme Greed, Greed, Neutral, Fear, and Extreme Fear. Different buy/sell may be applied at each level:

1. Extreme Greed (Index > 70)

Strategy: Preemptively sell or reduce holdings.  

Reason: When the index indicates excessive greed, the market may be overheated, increasing a risk of correction. To manage this risk, consider locking in profits by selling or setting stop-loss orders. Example: Following Trump’s 2024 election victory, crypto market sentiment surged, with the index staying above 80 for an entire month—strongly signaling selling opportunities to sell.

2. Greed (Index 50-70)

Strategy: Continue holding or modestly add positions.  

Reason: The market remains optimistic, though not excessively so, making it feasible to maintain or modestly  increase holdings.

3. Neutral (Index = 50) 

Strategy: Execute trades based on short-term trends or remain on the sidelines.  

Reason: Stable market sentiment suggests an equal likelihood of upward or downward movements.

4. Fear (Index 30-50)  

Strategy: Consider buying.  

Reason: Mild fear may present undervalued buying opportunities for long-term investments.

5. Extreme Fear (Index 0-30)  

Strategy: Buy aggressively.  

Reason: Panic selling during extreme fear provides significant entry points, as the market may return to normalcy.  

Example: After Trump announced reciprocal tariffs in April 2025, the index hovered between 21 to 25, signaling strong buying opportunities.

While the Fear and Greed Index can be a  useful tool, it has its limitations. Investors should consider the following factors when incorporating it into their strategies:

1. Avoid Sole Reliance on the Index

It reflects market sentiment and does not provide a comprehensive analysis of market conditions. It should be used in conjunction with technical tools (e.g., RSI, MACD) and supplementary metrics (e.g., stablecoin market capitalization).

2. Cross-Reference with Multiple Versions 

Given the variation between different index versions,  it is advisable to monitor several simultaneously. For example, consider  combining Alternative.me (for overall sentiment), exchange-specific versions (for real-time data), and Glassnode (for signal validation).

3. Understand Market Cycles

While index captures cyclical shifts in sentiment, it does not predict precise market  timing. It is important to balance short-term signals with broader,  long-term trends.

4. Watch for Extreme Events

External events—such as  exchange collapses or geopolitical conflicts—can trigger sudden spikes in the index. To avoid misinterpretation, always contextualise index readings with relevant macroeconomic or industry developments.

5. Integrate Risk Management

During periods of extreme greed or fear, consider setting stop-loss or take-profit orders to mitigate risk and protect investments from heightened volatility.

The Fear and Greed Index is a simple yet powerful tool for crypto investing. However, investors should be aware of its limitations and use it alongside other analytical methods and market indicators. Remaining calm and rational—free from emotional decision-making—is key to leveraging the index effectively for long-term investment success.