Fully Understanding the Bitcoin Fear & Greed Index (F&G Index)

The “Fear & Greed Index” is a tool that every crypto asset trader has probably seen at least once. This tool, which shows the market mood on a scale from 0 to 100, is widely used by traders—but why? Here’s a simple explanation of its purpose and how to use it.

What is the F&G Index? In Short

The F&G Index visualizes the overall market sentiment as a number. It’s calculated by combining multiple data points such as Bitcoin volatility, trading volume, social media buzz, Google Trends, and more.

The index levels are divided as follows:

• 0–24: Extreme Fear → May be a buying opportunity
• 25–49: Fear → Investors are cautious
• 50: Neutral → Market is balanced
• 51–74: Greed → High risk appetite
• 75–100: Extreme Greed → Warning sign, possible correction

How is the Index Calculated?

According to the method published by Alternative.me, six factors are combined with different weights:

1. Volatility (25% weight) Checks if Bitcoin’s price swings are more intense than usual. Compared against the 30- and 90-day averages, an abnormal rise signals fear.

2. Trading Volume and Momentum (25% weight) If current trading volume and momentum are above average, market sentiment is in greed mode.

3. Social Media (15% weight) Analyzes how much Bitcoin-related hashtags are trending on Twitter. A spike in activity signals greed, while silence suggests fear.

4. Google Search Trends (10% weight) A sharp rise in fear-related keywords like “Bitcoin crash” signals bearish sentiment.

5. Bitcoin Dominance (10% weight) An increase in Bitcoin’s market cap share means investors are fleeing altcoins = fear sentiment.

6. Surveys (15% weight) Community surveys (currently suspended).

Example Calculation

To calculate the F&G index for a certain day:

• Volatility score: 20 × 0.25 = 5
• Volume score: 75 × 0.25 = 18.75
• SNS sentiment score: 70 × 0.15 = 10.5
• Dominance: 30 × 0.10 = 3
• Google Search: 25 × 0.10 = 2.5

Total: 5 + 18.75 + 10.5 + 3 + 2.5 = 39.75

With this score, you fall into the “Fear” zone, theoretically indicating a good buying opportunity.

How Traders Use It

Combining with Swing Trading

The F&G index is weak on its own, so it’s important to combine it with other technical indicators. For example:

Bitcoin drops from $52,000 to $45,000 → F&G index hits 20 (extreme fear) → RSI drops below 30 (oversold) → MACD forms a bullish crossover

When these three signals align, it may be worth considering as an entry point for a rebound.

Not for Long-Term Forecasts

However, keep in mind that the F&G index is a short-term sentiment indicator and not suitable for long-term trend prediction. It doesn’t reflect structural changes in crypto assets (regulation, adoption, technological innovation, etc.), so relying on it alone is a no-go.

Trusted Data Sources

Alternative.me The original source of the Crypto Fear and Greed Index. Offers the most detailed breakdown.

CoinMarketCap Launched its own F&G index in 2023. Measures sentiment for a wide range of crypto assets, not just Bitcoin.

3 Practical Steps for Traders

1. Make a Trade Plan Don’t be swayed by the F&G index—decide your strategy, risk tolerance, and stop-loss lines in advance.

2. Keep a Trade Journal Record why you made each decision and the outcome. Patterns will emerge.

3. Learn from Experienced Traders Reference veteran trader strategies to improve your own approach.

Conclusion

The F&G index is handy for grasping the market’s “current mood,” but it’s not a cure-all. It’s only effective when combined with technical analysis, fundamental analysis, and risk management. Balance fear and greed, and always trade with discipline.