*as of June 18, 2025, Measurable by: CoinMarketCap.
The Fear and Greed Index is a tool used to measure investor sentiment in the stock or crypto market, aiming to determine whether asset prices are too high or too low due to investor emotions.
Here is a more detailed explanation:
This index was developed by CNN Business to measure investor sentiment in the US stock market. It is also used for the crypto market, especially for Bitcoin. The index uses various metrics to provide an overview of whether investors are in a state of fear or greed.
How Does It Work?
This index typically uses a scale from 0 to 100, where:
0-24 (Extreme Fear):
Indicates that the market is very worried and prices may be too low, making it a potential buying opportunity.
25-49 (Fear):
Indicates that the market is worried and there is potential for prices to continue falling.
50-74 (Greed):
Indicates that the market is optimistic and there is potential for prices to continue rising.
75-100 (Extreme Greed):
Indicates that the market is euphoric and prices may be too high, potentially leading to a correction.
Metrics Used:
This index combines several metrics, such as:
Market Momentum: How quickly asset prices rise or fall.
Stock Price Strength: How many stocks are rising or falling.
Market Volatility: How much the asset prices fluctuate.
Safe Haven Asset Demand: How many investors are seeking safe assets (e.g., gold) when the market is unstable.
Junk Bond Demand: How many investors are willing to buy high-risk bonds.
Call and Put Options: How many investors are betting on price increases or decreases.
Example of Use:
If the Fear and Greed Index shows a score of 80 (Extreme Greed), this could signal that the market is volatile and prices may soon drop. Conversely, if the index shows a score of 20 (Extreme Fear), this could signal that the market is worried and prices may be approaching a low point.
Important to remember:
This index is just one tool that can be used to analyze the market and should not be the sole basis for investment decision-making.
Investor sentiment can change quickly, so it is important to monitor this index regularly.
This index helps identify potential opportunities but does not guarantee profits.
