Fear and Greed Index: An Emotional Barometer Every Encryption Trader Must Read

OptionWhisperer · 2025-11-22T03:56:35+00:00

The Fear and Greed Index of the Bitcoin market ( F&G Index ) quantifies market sentiment, helping traders identify buy and sell signals. The index ranges from 0 to 100 points, where extreme fear can be seen as a buy the dip signal, and extreme greed indicates risk. Traders need to combine Technical Analysis and market data to develop clear trading strategies. At the same time, the F&G index should not be used alone and is suitable for short-term swing trading.

OptionWhisperer

2025-11-22 03:56:35

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The price of Bitcoin is experiencing big pumps and big dumps, are you following the trend or making rational decisions? The key depends on whether the Fear and Greed Index ( F&G Index ) can help you understand market sentiment.

What is the Fear and Greed Index?

This is a 0-100 emotional scale:

0-24 points: Extreme Fear → Bottom Buying Signal
25-49 points: Fear → Cautious observation
50 points: Neutral → Strength balanced
51-74 points: Greed → Risk rises
75-100 points: Extreme Greed → Beware of Bubbles

It integrates 6 data sources: volatility (25%), market momentum (25%), social media heat (15%), Bitcoin dominance (10%), Google Trends (10%), other factors (15%).

Why should traders pay attention to it?

Unlike traditional stock markets, retail sentiment has a huge influence in the crypto market. A single tweet on social media can trigger FOMO or panic selling. The F&G index quantifies this sentiment:

Index falls below 20 = Market is overly pessimistic, which may hide buying opportunities
The index surged above 80 = Greed reached its peak, adjustment is not far away.

Case Study: BTC fell from 52K to 45K

Assuming that the F&G index shows 20( extreme fear ):

Step One: Confirm the technical aspects

RSI falls below 30( oversold ) ✓
MACD shows a golden cross ( reversal signal ) ✓

Step 2: Wait for confirmation

Check if the trading volume stabilizes
Monitor on-chain data ( to see if whales are buying ).

Step Three: Develop a strategy

Build positions in batches rather than all at once
Set stop-loss to prevent black swan

Three Common Misconceptions

❌ Myth 1: Treating it as a prediction tool ✓ Correct usage: Short-term emotional mirroring does not equal trend prediction.

❌ Myth 2: Using alone ✓ Correct usage: in conjunction with candlestick charts, fundamentals, and on-chain data

❌ Misconception 3: Long-term holders trade according to F&G ✓ Correct usage: F&G is most suitable for short-term trading from 1 to 7 days.

Two official data sources

Alternative.me - Original index, BTC only
CoinMarketCap - upgraded version, covering mainstream coins

Final Words

The F&G index is like an electrocardiogram, it can only reflect the current pulse and cannot predict the future. Remember three principles:

1️⃣ Set a clear trading plan( Don't rely on feelings) 2️⃣ Record the reasons and results of each transaction 3️⃣ Learn the mindset framework of successful traders

Finding a balance between fear and greed is the key to stable profits.

BTC-0,34%

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