The Fear and Greed index, explained
The crowd sentiment tile is a single number from 0 to 100 that tries to answer one question: how is everyone feeling? It is the most quoted number in crypto and the most misused. Here is how to read it without getting fooled.
What it measures
The Crypto Fear and Greed index, published by Alternative.me, combines several measurable signals into one score. The main ingredients are price volatility, market momentum and trading volume, social media activity, Bitcoin's share of the market, and search interest. Each is compared with its own recent history, weighted, and blended.
The result reads as a mood. Zero is extreme fear, 100 is extreme greed. The Board shows the score, the band it falls in, and how it moved since yesterday.
The bands: 0 to 24 is extreme fear, 25 to 44 is fear, 45 to 55 is neutral, 56 to 74 is greed, 75 to 100 is extreme greed.
Why it matters
Crowds are most greedy near tops and most fearful near bottoms. That is not a theory; it is arithmetic. Prices peak when the last buyer has bought, and the last buyer buys when everyone is feeling good. Prices bottom when the last seller has sold, which happens when everyone is scared.
So the index works best as a contrarian reading. Extreme greed says the room is crowded on the buy side. Extreme fear says the sellers may be running out.
How to read today's number
The level and the change both matter. A move from 45 to 71 in a week says the mood changed fast, and fast mood changes tend to overshoot. A reading of 71 that has held for a month says something different: the market is in a sustained optimistic stretch, which can continue for a long time.
The most reliable use is at the extremes, and even there the word is tend. Extreme readings tend to mark turning points. They do not mark them on schedule. In a strong trend the index can sit above 80 for weeks, and selling on the first extreme greed reading has been a losing habit in every major rally.
Read it with the leverage tile. Extreme greed plus crowded long positions is a fragile market. Extreme fear plus leverage already flushed out is a market with less left to break.
What it does not tell you
The index does not know why people feel the way they do. A greed reading driven by steady ETF buying and one driven by a leveraged frenzy look the same on this tile. It also lags a little, because several of its inputs are measured over days, so a sharp reversal can be underway before the score turns.
Where the data comes from
The Board reads the published index at every site build. The methodology and weights belong to the index publisher; the Board reports the number and the band without adjusting them.