In the financial market, volatility and uncertainty make emotions often influence the choices of market participants. Fear and greed appear alternately, which easily leads to irrational decision-making. So, how to measure market sentiment, especially to judge whether it is in an extreme state? In traditional financial markets, sentiment indicators have long been widely used, and in the field of encryption, the Fear and Greed Index is the most common tool for measuring market sentiment fluctuations. In this issue of TRON Knowledge Bureau, we will take you to understand what the Fear and Greed Index of the Crypto Market is.
The Fear Greed Index (FGI) is an indicator that measures the sentiment of the crypto market. Its value fluctuates between 0 and 100. The lower the value, the more panic-like the market sentiment is, and the higher the value, the more greedy the market sentiment is. It is divided into four levels:
0-24 (Extreme Panic), the market is in an absolute panic state.
25-49: (Panic), there is still some fear in the market, but the degree is limited.
50-74: (Greed), market participants are becoming greedy and large buying is occurring.
75-100: (Extreme Greed) The market is in the extreme greed stage and is very hot.
The index was created by alternative.me and first released on February 1, 2018, with an index value of 30 on that day. It is calculated based on several key factors of Bitcoin, including volatility (25%), market momentum and trading volume (25%), social media sentiment (15%), survey data (15%, currently suspended), Bitcoin dominance (10%), Google Trends (10%) and other data sources. Its advantage is that it quantifies market sentiment through measurable data points, providing market participants with a relatively objective sentiment analysis tool, avoiding emotional judgments that rely purely on price behavior. At the same time, daily updates and historical data also enable market participants to better understand sentiment trends and compare current conditions with past market cycles.
It should be noted that different data sources or platforms may adjust the index levels. Some platforms will set a separate interval for neutral, while others will incorporate it into the fear and greed intervals. These differences will not affect the core function of the index, but users should pay attention to the division methods of different platforms.
According to Alternative.me data, the FGI index has experienced many extreme moments in history, which are often accompanied by violent market fluctuations. For example, in March 2020, the global financial market suffered a liquidity crisis due to the COVID-19 epidemic, and the FGI index quickly fell into the extreme panic range and remained below 25 for more than a month, with the lowest value reaching 8. During this period, market sentiment was extremely pessimistic and market participants generally panicked. On the contrary, the most recent extreme greed range occurred in November 2024, when the FGI index remained above 75 for many days, reaching a high of 94, accompanied by continuous breakthroughs in the market.
Interestingly, the FGI indexs sustained extreme performance is usually accompanied by a market reversal. In times of extreme panic, the market may create undervalued opportunities due to excessive fear; while in times of extreme greed, overheated markets often usher in adjustments. This phenomenon provides an important reference for market participants, helping them to better observe changes in market sentiment and eliminate emotional bias.
Although the Crypto Fear and Greed Index has been widely used, it still has certain limitations. As it focuses mainly on Bitcoin data, the index may not fully reflect the broader crypto market sentiment as the industry continues to develop. At the same time, reliance on public data sources means that it may ignore important factors such as institutions and over-the-counter flows. In addition, analysis based on historical data often reacts slowly to sudden market events and cannot capture key market signals in real time. For example, after the release of some major news, market sentiment may change rapidly, and the update of the index usually lags behind the actual market reaction.
Therefore, market participants should regard it as a reference tool and consider the broader market context when interpreting the index, and combine it with other indicators or methods to make a more comprehensive and rational analysis.
