In June 2022, when the index dropped to an extreme fear level of 6 out of 100, the market panicked and pessimists said a market crash was imminent.  However, experienced traders viewed the sharp decline in the index as an indication of an impending trend reversal. Just a couple of weeks later, Bitcoin began to recover, confirming that emotions are a powerful indicator of market direction.

The Fear and Greed Index is an analytical tool that measures the mood of the crypto market and converts it into an understandable numerical value. It shows whether fear, causing investors to sell in a panic, or greed, pushing them to buy at the peak of excitement, is currently prevailing. In conditions of high cryptocurrency volatility and uncertainty, this tool becomes an additional guide for those who believe it is important to consider the emotional context behind the charts. Analyzing the market situation with emotional fluctuations in mind allows you to better understand its cycles, avoid fatal mistakes, and make more informed financial decisions. It helps predict crowd behavior, identify favorable entry and exit points, and adapt crypto trading strategies to constantly changing realities.

How the Fear and Greed Index Works

The Fear and Greed Index for Bitcoin and other cryptocurrencies was developed by Alternative.me, a Spanish company that specializes in digital asset and financial market analytics. They adapted a concept originally used in stock markets, such as the CNN Fear & Greed Index, to cryptocurrencies. The team presented their index to the public in 2018. It turned out to be clear, convenient, and understandable. Thanks to its regular updates and ease of interpretation, the index has gained widespread popularity and is now one of the crypto market’s key indicators for assessing investor psychology and prevailing sentiments.

The Alternative.me website is still the most popular platform on which it can be viewed. The fear and greed index on it is updated daily. This indicator is also integrated into many analytical platforms and trading applications for users’ convenience.

The index is based on six key metrics, each of which reflects the current mood of the crypto market in its own way:

1. Cryptocurrency volatility: Sudden price increases or decreases are one of the main indicators of fear. If the market is highly volatile, the indicator often enters the panic zone. This indicates instability and a decline in investor confidence.
2. Trading volumes and market momentum: A decline in trading volumes indicates caution. Conversely, a sharp increase in trading volumes accompanied by rising prices may signal the onset of a greed phase. This data helps analyze the crypto market in real time.
3. Social media activity: Algorithms track mentions of cryptocurrencies, especially Bitcoin, and the context in which they are discussed. When the crypto community shows excessive positivity and interest, the indicator shifts towards greed.
4. Conducting mass surveys: For example, user opinions are collected through answers to questions such as: “Do you think now is a good time to buy/sell BTC?” Although this indicator is used less frequently today, it remains an important metric of collective perception.
5. Google Trends: The frequency of search queries such as “buy bitcoin” or “crypto market forecast 2025” indicates growing interest and a possible revaluation of assets. This component is particularly sensitive to hype phases. For example, consider the query, “Which cryptocurrency will take off this week?”
6. Bitcoin dominance: If the share of BTC is growing, it may indicate fear, as investors move out of altcoins and into more stable assets. Conversely, a decline in dominance may be a sign of greed, as investors start to take risks by investing in more volatile tokens.

How the Scale Works: From Panic to Euphoria

The Fear & Greed Index is measured on a scale from 0 to 100.

• 0–24: Extreme fear, which is a signal of a potential market bottom.
• 25–49: Fear. Most investors are pessimistic.
• 50 — neutral level, balance of emotions;
• 51–74: Greed. The market is actively buying.
• 75–100: Extreme greed. A correction is likely.

Thus, the index acts as a kind of “barometer” of emotions in the crypto market. It helps record the current mood and predict possible trend reversals.

The Index’s Impact on the Crypto Market

The Fear & Greed Index does more than simply reflect sentiment; it can also impact the behavior of market participants, shaping waves of supply and demand, and consequently, price movements. Changes in its values often coincide with reversal points and sometimes even anticipate them.

Correlation with Price: When to Buy and Sell

In practice, analyzing fear in the cryptocurrency market shows that when indicators fall below 25, it often indicates excessive pessimism and a potential market bottom. During these periods, assets are undervalued and major players begin entering the market. Conversely, a value above 75 indicates extreme greed and possible overvaluation, after which the market is prone to correction. The cryptocurrency greed index is particularly effective for short-term trading because crowd behavior plays a critical role. Long-term investors also use it to identify market phases: accumulation, growth, overheating, and capitulation.

Historical Examples: From Panic to Euphoria

• At the end of 2018, the index entered the extreme fear zone at 10 points. At that time, Bitcoin was trading at around $3,200. This marked the cycle’s low point; a year later, BTC had grown almost threefold.
• In spring 2020, during the pandemic, a sharp fall in cryptocurrencies and an index of around 12 preceded one of the strongest bullish phases in history.
• In November 2021, the index reached values of around 80 when BTC updated its historical maximum of $69,000. Euphoria and greed in the crypto market coincided with a downward reversal and the beginning of a large-scale correction.

Psychology: Panic and Reckless Enthusiasm

When investors are gripped by fear, they sell en masse, locking in losses. This amplifies the decline, creating a domino effect. Conversely, greed breeds irrational optimism and asset overvaluation. During such periods, participants forget about caution and enter the market at inflated prices. This causes sharp ups and downs, further exacerbating the significant volatility already present.

Application in Trading and Investing

How should the index be used? For many traders and investors, it has become an important decision-making tool. It helps determine when the market is overheated or in panic mode and can be used to identify profitable entry and exit points.

Strategy: buy on fear, sell on greed

The classic approach: “Buy when they are afraid, and sell when they are greedy.” In practice, this means:

• Purchase at values below 25 when the crypto market sentiment is pessimistic and many assets are undervalued.
• Sell or take profits when values are above 75 and euphoria and overvaluation prevail.

This strategy is especially relevant in conditions of high uncertainty when investors’ emotional fluctuations are amplified by external factors such as news, regulatory measures, or geopolitical events.

Combination with other indicators

While the index is useful on its own, it is most effective when combined with technical analysis tools:

• The RSI (relative strength index) allows you to assess whether an asset is overbought or oversold.
• Moving averages show the medium-term trend.
• Trading volumes help understand the strength of the current movement.

When combined with other cryptocurrency market metrics, this approach helps smooth out unnecessary emotional “noise” and eliminate impulsive decisions, which can be costly when driven by emotions.

Limitations: It is not a panacea, but rather a tool

Despite its popularity, the index has its weaknesses. It does not account for fundamental changes, such as hacks, mergers, geopolitical factors, or legislative changes. It may also lag in its response and, like any indicator, does not guarantee 100% accuracy.

Current trends and forecasts for 2025

In June 2025, the Fear & Greed Index was in the 65–70 point range, signaling moderate greed. This reflects growing interest in cryptocurrencies amid a strong bullish trend. Bitcoin is trading in the $105,000–$106,000 range, demonstrating resilience following the spring rally. Interest in Ethereum has also increased, particularly in anticipation of the launch of spot ETFs.

Factors affecting the index in 2025

Current analysis shows that the key drivers of crypto market sentiment in 2025 are:

• ETF approval in the US: Approval of ETFs for BTC and ETH, as well as the anticipation of ETFs for other cryptocurrencies, is bolstering confidence in the industry among institutional and retail investors alike.
• Global regulation: The implementation of MiCA in the EU and the SEC’s clarification on several crypto assets have reduced uncertainty.
• The increase in the number of hacks and incidents is causing fear and increasing the short-term volatility of cryptocurrencies. Major attacks on DeFi protocols and bridges are causing fear and increasing the short-term volatility of cryptocurrencies.
• Macroeconomic signals: Lower interest rates and a weaker dollar increase the attractiveness of crypto assets as an alternative to fiat instruments.
• Certain sectors are overheating. The rapid growth of RWA-, DePIN-, and AI-based tokens raises concerns about a possible local correction.

Crypto market forecast for 2025

The market is expected to remain highly sensitive to news and unpredictable events during the second half of the year. In such conditions, the 2025 fear and greed indicator becomes an important benchmark for investors and traders. When combined with other indicators, its value allows for the development of balanced cryptocurrency investment and trading strategies. This is particularly important when working with altcoins, which often react more strongly to market emotions than Bitcoin.

Conclusion

The Fear and Greed Index is a unique tool that helps understand the mood of the cryptocurrency market and predict its dynamics. It reflects the market’s emotional state, which directly affects investor behavior and the level of cryptocurrency volatility. Track emotions in the cryptocurrency market, check the index, and apply the obtained data in combination with other tools. This will reduce risks and increase the effectiveness of trading and investing.

Thank you for reading our article. Invest safely and profitably!

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FAQ

What is the fear and greed index?

It is a metric that measures the mood of the cryptocurrency market and the emotional state of investors on a scale from 0 to 100, ranging from fear (panic) to greed (euphoria).

How does the index affect the crypto market?

Its values correlate with prices: low readings signal fear and potential buying, while high readings signal greed and possible selling.

Can the Fear and Greed Index be trusted?

It is a useful indicator for assessing sentiment, but it should not be the only factor considered. The crypto industry is subject to unexpected events, the impact of which the index is not always able to reflect.

How should the index be used for trading?

It is recommended to buy when the index is low (e.g., less than 25) and to consider selling when it is high (e.g., greater than 75). However, it is best to use the index with other indicators.

What factors does the index take into account?

Its calculation includes cryptocurrency volatility, trading volumes, social media activity, surveys, search query trends, and BTC dominance.

How often is the index updated?

Most platforms, such as Alternative.me, updаte their indicators daily, allowing you to track changes in real time.

Why does fear signal a buy?

It usually means that asset prices are falling to attractive levels and it’s time to buy them at a bargain price.

What does extreme greed mean?

It indicates an overheated market, when investors may make rash purchases. Such sentiments often precede a correction.

Which indicators should be combined with the index?

It is best to combine the index’s indicators with RSI, moving averages, and trading volumes to develop the best strategies and achieve a more accurate analysis.

How will the index help investors in 2025?

By then, the fear and greed index will be an essential tool for gauging market sentiment and managing risk amid volatile conditions.