The website Alternative.me has a Fear and Greed Index related to cryptocurrency. It is a 0–100 scale that is based mainly on Bitcoin. The index is a calculation that consists of factors that determine certain sentiments and market conditions. In their calculation, they take into consideration 6 factors, namely:

• Volatility (25 %)
• Market Momentum/Volume (25%)
• Social Media (15%)
• Surveys (15%)
• Dominance (10%)
• Trends (10%)

The Fear & Greed Index (April 5, 2025) shows the market sentiment is 30 (Fear). This is amidst the US tariff plan ("Liberation Day") causing uncertainty and chaos in the markets, including cryptocurrency.

We know that during times of peak curiosity for cryptocurrency, people will be doing research on search engines. When “Bitcoin” or “Ethereum” is trending, it is considered an important contributor to the index. Data from social media hashtags are also looked into. The more users put "Bitcoin", the more likely it is being hyped and discussed.

The volatility is an important market indicator which can show liquidity and movement in the markets. More volume of course means more transactions and that is a good sign that people are using it. Digital exchanges like Coinbase and Binance provide this information on their website.

Perhaps another important indicator in technical analysis is Market Momentum to Volume ratio in 30 to 90 day average This gives an indicator that gauge the strength and speed of price trends. If price momentum is trending high, traders will "buy high and sell higher", and that is getting greedy.

3-month outlook on the Fear and Greed Index. When the index is closer to “0”, it indicates more fear.

What This All Means

According to the index, when there is extreme fear in the markets, the index value is either “0” or close to “0”. This occurs in cycles when the market is not liquid, meaning people do not have money to invest.

This happens when there are financial disruptions in the economy. It does correlate with cryptocurrency markets as evidenced in the market crash in early 2020 due to the coronavirus pandemic.

When the world is in crisis, cash is more immediate than cryptocurrency. Thus there is no need for people to go out and buy it when they first need to satisfy their basic needs. Since you cannot use cryptocurrency for most purchases, it is not a priority. People move from risk-on to risk-off assets or just exit to cash.

The market looks bleak and very bearish., so investors will move toward safe haven assets or cash. This is due to the uncertainty this brings. People do not know if they will have an emergency, and if they do not have any liquid money on hand, they may not be able to cover those expenses.

When there is greed, the signs are more bullish. Traders will add leverage to their trade while speculating on cryptocurrency prices to increase. The index climbs above 50 and at 100 is the peak of it.

This leads to buy signals across spot exchanges. This is usually due to good news in the market (e.g. SEC does not consider BTC a security). When certain countries announce that they won’t ban cryptocurrency, it is usually also followed by market optimism.

Human psychology plays a big role in fear and greed. These are emotions that affect people's behavior, and in this case its relation to cryptocurrency.

It's About Greed

It won’t be a surprise if most of the new buyers are noobs who are getting into the market for the first time. They try to buy up as much as they can, while certain veteran traders are accumulating as well. It is actually not a good idea to buy when the prices start to increase, yet noobs are usually the first ones to buy.

This can drive the asset to become oversold after a period of heavy buying. This is a sign of greed, and the indicator to watch for is the RSI (Relative Strength Indicator). In the crypto markets, a value that is above 30 generally indicates bullish momentum, while a falling RSI value below suggests bearish pattern emerging.

For example, when Bitcoin hits below 30 it indicates an oversold condition. The RSI suggests that Bitcoin may be undervalued in the short term, and a price correction or reversal could be approaching.

Traders who get too greedy might add more leverage on their trades. Many traders who trade long on leverage can get liquidated when prices crash, as there are more short sellers than buyers. This is one of the risks involved with cryptocurrency trading.

Traders are making money and holder's bags increase during a greed phase. This is when

accumulation and high spending in the market is taking place.

Fear In Market Cycles

Now it becomes a cycle of buying and selling that occurs. The more sophisticated traders, including whales, would prefer the market dumped so the prices will dip. When that happens, they accumulate more.

This creates another type of greed cycle when the digital asset is seen as undersold. Investors begin buying so all of a sudden, the volume increases, and the market signals buy after the previous sell.

Those who sold would be the biggest losers here, but guess who didn’t lose? The HODLers or those who did not sell their crypto. It is human nature to sell low and buy high, and this really happens all the time.

Many sell low because of the fear of prices going to “0,” thus they incur more losses or recover some of the money invested. In reality, your 5 BTC for example, is still 5 BTC at the end of the day if you didn’t sell. What is arbitrary here is the market value in fiat currency, not the actual value in cryptocurrency.

Fear as an emotion is a survival instinct. The reason people sell low is because they do not want to lose all their money, but they end up losing a lot than if they did not sell. Others will sell because they do not have the money they need for their daily needs.

These cycles repeat over and over again. When people are in fear, they will stop buying and start selling off. This might be a good opportunity for those who want to buy low.

When there is fear all is not well. It is a period of gloom and part of a bearish pattern

in the market when prices are falling or there is plenty of FUD (Fear, Uncertainty, Doubt)

Conclusion

The Fear & Greed Index should be used to gauge the market sentiment, but does not explain why the market is the way it is. This only gives users an idea of just how the rest of the market feels and how it affects asset prices.

Fear and greed are natural human emotions that can affect decision making. In the cryptocurrency market this determines which direction the price value will go.

Follow a golden rule for balance. Do not get too greedy and avoid extreme fear. Make sure there is a an investment strategy to collect profit and mitigation measure in case things do not work out.

If you are on the margins of a leveraged trade, close it before it gets liquidated. Do not play games during a greed cycle with leverage because this is often how traders lose big money.

Think before you sell during extreme fear cycles. People often regret what they do because of their emotions. Sometimes it is best to seek other people's help or advice, but most things you do with crypto are irreversible. If you sell at a low price, you cannot cancel the transaction once it is confirmed.

Disclaimer: This is an opinion piece and not financial advice. Bitcoin and cryptocurrency is not without risk. Please do your own research always for education and further understanding.

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Disclosure: Some of the images used in this article were generated using AI.