The Crypto Fear and Greed Index is one of the key tools for traders and investors alike. The index is used to gauge market sentiments and is composed of several factors that go into its calculation, like market volumes, volatility, Bitcoin’s dominance, and social media posts. All these factors are then averaged with individual weights associated with them to obtain the index score.
In this article, we will elaborate on all the factors that go into the calculation and how the final index score is obtained.
Factors Used to Calculate The Crypto Fear and Greed Index
Volatility (25%)
Volatility refers to the net sum of all movements in the crypto markets (or any market) in a given period of time.
Volatility in the markets is caused by frequent changes in market sentiments, news flows, technical chart patterns, or events (token launches, regulatory events).
Volatility is therefore assigned the highest weightage in the crypto markets to calculate the fear and greed index.
Market Momentum (25%)
Market momentum is the net result of all market trends. It is generated when markets move in the same direction for a period of time, say a day, week, month, or year. This is different from volatility because momentum is movement in a single direction, whereas volatility is frequent movement in one direction.
Momentum is calculated by observing the prices of the top cryptocurrencies, such as Bitcoin, Ethereum, XRP, and Solana, using indicators like RSI, Stochastic RSI, MACD, and Bollinger Bands.
Social Media (15%)
Social Media trends also play a critical role in shaping market sentiments. Stronger social media trends around the Gamestop stock were the genesis events of memecoins. Further, social media plays a critical role in shaping market trends like FOMO or FUD.
To calculate social media trends, data is collected from sources like X.com, Instagram, Facebook, Telegram, YouTube,
Surveys (15%)
Surveys were a major factor in the calculation of the score, but since last year, they have been discontinued by Alternative.me.
Most surveys were sourced from social media and survey tools.
Bitcoin Dominance (10%)
Bitcoin’s dominance plays a key role in shaping market sentiments because of its sheet size that accounts for more than 50% of the crypto market cap at most times.
Trends (10%)
Trends like the Memecoin Supercycle, Alt Season, RWA rallies, and AI Agents play a key role in deciding market behavior. For example, we saw that during the memecoin supercycle, major utility-based cryptocurrencies saw a dramatic downtrend as the attention of the market shifted in that direction.
Calculation Formula
Final Score=(V×0.25) + (M×0.25) + (S×0.15) + (R×0.15) + (B×0.10) + (T×0.10)
Where:
- V = Volatility
- M = Market Momentum
- S = Social Media
- R = Surveys
- B = Bitcoin Dominance
- T = Crypto Trends
Live Crypto Fear and Greed Index Chart by Alternative.me
The sel-updating chart below is a self-updating crypto chart that has been created with the above factors and using the calculation shown in the previous section.
Interpretations of Chart Scores and Readings
The Crypto Fear and Greed Index is a scale between 0 and 100, with a score near zero being in the extreme fear zone and a score near 100 being in the extreme risk zone.
The following are the divisions in the crypto fear and greed index.
0 to 25 – Extreme Fear
This zone shows that the crypto markets are in an extremely fragile zone and have been falling with a very high momentum.
25 to 50 – Fear to Moderate
This zone shows that the markets are in a skeptical mode but are less likely to show any major fall.
50 to 75 Moderately Greedy
This zone shows optimism in the crypto markets and indicates that the sentiments are generally bullish.
75 to 100 Extremely Greedy
This zone typically comes in a bull market and shows extreme enthusiasm.
