Every day we analyze emotions and sentiments from different sources and summarize them in one easy number: the fear and greed index for Bitcoin and other major cryptocurrencies.
Crypto Concern & Greed Index Over Time
This is a graph of the fear and greed index over time, where a score of zero represents «extreme fear» while a score of 100 represents «extreme greed.»
Why measure fear and greed?
The behavior of the crypto market is very emotional. People tend to get greedy when the market goes up, which leads to FOMO (fear of missing out). Also, people often sell their coins in an irrational reaction when they see red numbers. With our Fear and Greed Index we try to save you from your own emotional overreactions. There are two simple assumptions:
- Extreme fear can be a sign that investors are too worried. This could be a buying opportunity.
- When very greedy investors come, that is, the market is pending correction.
Therefore, we analyze the precise mood of the bitcoin market and divide the numbers on an easy counter from zero to 100. Zero means «extreme fear» while 100 means «extreme greed». Below you will find more information about our data sources.
We collect data from the following five sources. Each data point is scored in the same way as the day before to visualize significant progress in changing crypto market sentiment.
First of all, the precise index is for Bitcoin only (we will be offering separate indices for major altcoins soon) as a big part of this is coin price volatility.
But let’s list all the different factors that we include in the precise index:
We measured the precise volatility and maximum drawdowns of Bitcoin and compared them to the corresponding 30-day and 90-day averages. We argue that an unusual spike in volatility is a sign of an anxious market.
Market dynamics/volume (25 %)
We also measure the precise volume and momentum of the market (again compared to the last 30/90 day averages) and put these two values together. Generally, when we see high buying volumes in a positive market on a daily basis, we conclude that the market is trading too greedy/too bullish.
Social media (15%)
While our reddit sentiment analysis isn’t in the live index yet (we’re still experimenting with some market-related keywords in the word processing algorithm), our Twitter analysis is ongoing. There we collect and count posts on different hashtags for each currency (publicly we only show bitcoin) and check how fast and how many interactions they get in certain time periods). An unusually high interaction rate leads to increased public interest in the coin and, in our view, corresponds to greedy market behavior.
Surveys (15%) currently on hiatus
Together with strawpoll.com (disclaimer: we also own this site), a fairly large public survey platform, we conduct weekly crypto surveys and ask people how they see the market. Typically, we see 2,000 to 3,000 votes in each poll, which allows us to get a sense of the mood of a group of crypto investors. We didn’t pay too much attention to these results, but at the beginning of our study it was quite useful. You can see some recent results here.
The dominance of a coin is comparable to the market cap share of the crypto market in normal. For Bitcoin specifically, we believe that an increase in Bitcoin dominance is being caused by fears (and thus a reduction) of overly speculative investment in altcoins as Bitcoin continues to become a safe haven crypto asset. On the other hand, as Bitcoin dominance scales back, people will get greedier, invest in riskier altcoins, and dream of their chance in the next big bull run. However, when looking at the dominance of a currency other than bitcoin, the opposite could be argued, as increased interest in an altcoin suggests bullish/greedy behavior for that specific coin.
We pull data from Google Trends for several bitcoin-related searches and crack these numbers, specifically search volume change, as well as recommend other currently popular searches. For example if you check Google Trends for «Bitcoin», you can’t get much information from the search volume. But currently you can see that there is currently a +1,550% increase in the query “Bitcoin Price Manipulation” in the related search queries field (status: 05/29/2018). This is clearly a sign of fear in the market and we use it for our index.
No investment advice
The information provided on this website does not constitute investment advice, financial advice, business advice or any other type of advice and you should not treat the content of the website as such. Different.me does not recommend that you buy, sell or hold cryptocurrencies. Please carry out your own due diligence and consult your financial advisor before making any investment decisions.