The Fear & Greed Index helps predict trends by measuring the overall sentiment of investors in the crypto market.

How it works:

It analyzes several factors, such as volatility, volume, Bitcoin dominance, social media, and searches. The result is a score from 0 to 100:

- 0 to 24: Extreme Fear

- 25 to 49: Fear

- 50: Neutral

- 51 to 74: Greed

- 75 to 100: Extreme Greed

Why it is useful:

- Extreme fear usually occurs at bottoms, when many have sold and the price may be about to rise.

- Extreme greed appears at tops, when the market is overheated and vulnerable to corrections.

Practical application:

Contrarian investors use this index to do the opposite of what most are doing:

- Buy in extreme fear

- Sell or reduce risk in extreme greed

Summary:

The Fear & Greed Index does not predict the market with absolute accuracy, but it is a valuable tool for understanding the emotional climate of participants and making more rational decisions.