What is Crypto Fear and Greed Index?

What is Crypto Fear and Greed Index?
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Cryptocurrency is a volatile asset, rise in crypto markets often leads to FOMO (fear of missing out) amongst people. According to a report by Crypto.com, global crypto investors reached 106 million in January 2021. 

Crypto Fear and Greed Index are used to measure sentiments of the cryptocurrency market from different sources. It is an overall indicator of market sentiments and guides investors in making wise investment decisions based on several other inputs. The index ranges from 0-100, where 0 shows extreme fear and 100 represents extreme greed.

What is the Fear and Greed Index?

The index is focused on measuring investors' sentiments towards the market; the index signifies whether the market is bearish(low) or bullish (high). 'Extreme fear' indicates that investors are worried, but it could also be a buying opportunity.

How Does It Work?

The crypto Fear and Greed Index ranges from 0 to 100. It indicates greed in the market leading to a bullish trend. A lower score represents fear in the market (i.e. if the score appears red) which means more and more investors are selling, causing a bearish trend in the cryptocurrency market. A higher score represents that people are buying, which means greed is high (scores appear in green). A score between 0-24 means' Extreme fear'.

'Fear' in the market is defined between 25-49, and eventually, a score over 50 represents neutrality in the cryptocurrency market. The index scores 51-74 when there is 'greed' and beyond 75 indicates 'Extreme Greed' in investors.

The Fear and Greed Index analyzes information based on volume, volatility, coin's dominance and social media posts. Volatility holds for 25 per cent of the index, followed by market volume (25%) and social media posts (15%). Although the Fear and Greed Index helps understand the market conditions to some extent, the decision to hold, withdraw or invest cannot be based on the index as it cannot predict the accurate future movements of the cryptocurrency market.