Various Crypto Fear and Greed Index signals that influence the behavior of traders and investors include Google Trends, Surveys, Market Momentum, Market Dominance, Social Media, and Market Volatility.
To determine the trend of greed in the market, examine the trending search phrases. For example, a high volume of searches related to Bitcoin means a high degree of greed among investors. This factor represents 10% of the index value. Historically, increases in Bitcoin-specific Google searches have been correlated with extreme volatility in cryptocurrency prices.
To calculate the number each day, the Bitcoin Greed and Fear Index considers a few other factors, such as polls, which account for 15% of the index value. Surveys with participants of more than 2000 raise the value of the index, indicating the presence of greedy investors.
Market momentum refers to the market's ability to maintain a long-term price trend and represents 25% of the index's value. This examines the health and direction of the market. The greed side of the index takes momentum into account.
Dominance examines the dominance of the cryptocurrency market in the cryptocurrency industry in general. For example, the higher the dominance of Bitcoin, the fewer alternative cryptos there are. However, a drop in Bitcoin dominance suggests growing greed and accounts for 10% of the index.
It is not surprising that social networks have a 15% influence on the index because it is currently one of the most important aspects of our lives. At the greedy end of the spectrum, things like hashtags, engagement, topics, and mentions on various social networks are considered.
A quarter (ie 25%) of the index is made up of market volatility. It examines the current price of a cryptocurrency (such as the price of Bitcoin) and compares it to recent price movements over the last 30 to 90 days to determine how volatile the market is. In the index, volatility is used as an indicator of fear.
