10/14/2025

13 min read

Fear and Greed Index simply explained

Markets aren't only moved by numbers and data, but also by emotions. Fear and greed drive investors to sell in panic or to invest hastily. The Fear and Greed Index summarises the type of market sentiment in a single figure and shows whether investors are currently more cautious or risk-taking. But what exactly is the Fear and Greed Index and what does it tell us?

In our explanation of fear and greed, we outline the meaning and function, show how it's calculated, and explain contributing factors.

The Fear and Greed Index is an indicator that, based on various market data, shows whether market sentiment is shaped by fear or greed.
The index developed by CNN for the stock market, as well as the Fear and Greed Index for the crypto market, helps investors identify market exaggerations.
Extreme values of the index may indicate upcoming corrections or buying opportunities, but should be combined with other analyses.
Long-term investors, for example on the stock exchange, can use the Fear and Greed Index to avoid emotion-driven outcomes and make rational investment decisions. As a result, they may achieve more positive results with their investment.

Definition: What is the Fear and Greed Index?

In the first part of this article, we want to define what the Fear and Greed Index actually is: an indicator of market sentiment. The Fear and Greed Index, along with the index developed by CNN for the stock market, measures market sentiment using a score between 0 and 100. A low score stands for extreme fear, while a high score indicates extreme greed.

But what does the Fear and Greed Index specifically mean for investors? Investors often follow their emotions – in uncertain phases fear dominates, while in strong market phases greed increases. The index summarises the sentiment and helps to identify possible exaggerations.

Its function is simple: The index collects various market data and calculates a figure from it that shows whether investors are acting more fearfully or optimistically. There are different versions of the index for stock and crypto markets, which differ in their metrics.

Did you know? In 2012, CNN Money developed the Fear and Greed Index to measure the two most important emotions in the market: greed and fear. They wanted to gain a better understanding of investor behaviour in the market. However, you shouldn't confuse CNN with the US news broadcaster. CNN Money doesn't belong to that company, but received a licence for the brand.

For both stock and crypto markets, the Fear and Greed Index serves as a common sentiment barometer. If the barometer rises, euphoria dominates, potentially leading to a market bubble. If it falls, fear prevails and selling pressure among investors increases.

In the stock market, the index is particularly based on volatility, trading volume and the ratio of rising to falling stocks. A low score indicates uncertainty and pessimism, which is often associated with waves of selling. A similar picture emerges in the crypto world. Except that cryptocurrencies are generally even more susceptible to market fluctuations (volatility), making emotions play an even greater role than in the traditional stock market.

Unlike stocks, the Fear and Greed Index for Bitcoin (BTC) and other altcoins is based on market dominance (Bitcoin), trading volume and sentiment on social media. High values suggest that many investors are entering the market due to rising prices, often because of FOMO (Fear of Missing Out). If the index drops sharply, uncertainty often prevails, which manifests in panic selling. Especially in volatile phases, the index can offer valuable clues as to whether the market is overheated or if a buying opportunity is emerging.

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Why is the Fear and Greed Index measured?

Primarily, investors and traders of cryptocurrencies or stocks on the stock exchange use the Fear and Greed Index as an indicator to identify market exaggerations. It can provide clues about upcoming corrections or buying opportunities, especially when values reach extreme areas.

In combination with other analytical methods, such as technical analysis, the index can help interpret the crypto or stock market better. It's also useful for risk management, as high greed values may indicate potential overheating, while extreme fear often signals the potential for a market recovery.

How is the Fear and Greed Index calculated?

The Fear and Greed Index summarises various sentiment indicators and displays them on a scale from 0 to 100, where 0 stands for extreme fear and 100 for extreme greed. The calculation is based on the analysis of several market indicators, each of which receives a value between 0 and 100. The average of these values gives the current level of the index.

How often is the Fear and Greed Index calculated?

There are no fixed days or hours for calculating the Fear and Greed Index. Rather, it is calculated immediately as soon as all necessary data is available. This has a major advantage for investors. They receive constantly updated results, allowing them to always stay up to date.

Which factors contribute to the Fear and Greed Index?

Several factors that reflect market sentiment make up the Fear and Greed Index. These include volatility, trading volume, Bitcoin dominance (in cryptocurrencies), and investor behaviour in the options and bond markets. Search trends, social media activity and opinion polls also feed into the calculation.

The data points are weighted and summarised by analysts into a value between 0 and 100. The resulting figure indicates whether the market is currently dominated by fear or greed.

To help you understand better, we've explained the various indicators in detail below.

Current volatility

Volatility describes the range of fluctuation in a market. Strong price movements often indicate uncertainty, while stable phases suggest a calm market mood. The Fear and Greed Index measures volatility using indicators such as the CBOE Volatility Index (VIX) for stocks or Bitcoin's price fluctuations in the crypto market. High volatility pushes the index towards fear, while low volatility suggests greed.

Bitcoin dominance

In the crypto market, Bitcoin dominance plays a major role. It indicates Bitcoin's market share compared to all other cryptocurrencies. Rising Bitcoin dominance often signals a cautious market mood, as investors focus on the "safe haven" of Bitcoin. If dominance falls, risk appetite increases and more traders invest in altcoins, which may indicate a phase of greed in the Fear and Greed Index.

Market trading volume and “market momentum”

Rising trading volumes with increasing prices signal greed, while falling prices with high volume often point to fear. The so-called market momentum analyses the strength of price movements – when many stocks or cryptocurrencies rise continuously, this indicates an optimistic market sentiment.

Stock price strength and stock price breadth

These two indicators relate to the stock market:

Stock price strength measures the ratio of stocks reaching new 52-week highs compared to those hitting 52-week lows, with many new highs signalling market optimism.
Stock price breadth analyses the ratio of rising to falling stocks, and when the number of winning stocks outweighs the losers, the Fear and Greed Index rises towards greed.

Social media sentiment

Social media activity plays a particularly important role in the crypto market. Mentions and discussions about Bitcoin or altcoins on Twitter, Reddit and Telegram feed into the index. High activity with positive comments suggests greed, while negative discussions often signal fear.

Google Trends

Search volumes for terms such as “buy Bitcoin” or “stock market crash” provide insight into the behaviour of retail investors. Rising searches for optimistic terms reflect market greed, while increasing queries about hedging strategies or crash forecasts indicate fear.

Opinion polls

To measure investor sentiment directly, survey results are included in the index. The surveys are conducted regularly and ask investors about their market expectations for the coming weeks. If optimism dominates, the index rises – if pessimism prevails, it falls.

Junk and bond demand

In the bond market, market sentiment is reflected in the demand for junk bonds. These are high-yield, high-risk bonds. Increased interest in junk bonds indicates risk appetite and therefore greed. Conversely, if investors increasingly choose safe investment-grade bonds over junk bonds, this signals fear.

Safe haven demand

Demand for safe assets like gold, government bonds or the US dollar typically increases in uncertain market phases. Investors flee to these safe havens when they fear a crisis. The Fear and Greed Index takes these developments into account – high demand for safe assets often means rising fear.

Put and call options

The options market also provides insight into market sentiment. The ratio of put to call options shows how many investors are hedging against falling prices. When many market participants buy put options, the index rises towards fear. If call option buying dominates, this signals increasing risk appetite and therefore greed.

How do you interpret the Fear and Greed Index?

The Fear and Greed Index shows prevailing market sentiment on a scale from 0 to 100, with extreme values providing important signals for investors. A low value (0 to 25) signals extreme fear, indicating that investors are pessimistic and possibly selling in panic. A high value (75 to 100) in the Fear and Greed Index points to extreme greed, meaning that investors are overly optimistic and taking on more risk.

Mid-range values between 25 and 50 show a predominantly fearful market mood, while values between 50 and 75 indicate a tendency towards greed. A value around 50 means the market is balanced without extreme emotional swings.

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Extreme values, in particular, can serve as a contrarian indicator. Phases of extreme fear may offer buying opportunities, as many investors sell in panic and prices drop. High greed values, on the other hand, suggest an overbought market, which could lead to a possible price correction. However, the index shouldn't be viewed in isolation but rather combined with other market analyses. For investors, it can be worthwhile to observe the Fear and Greed trend over a longer period. This allows you to better recognise or assess recurring patterns and turning points.

Let's take a look at a concrete practical example:

When the Fear and Greed Index reaches extreme values, it may indicate an upcoming market reversal. Here's an example:

Stock market crash 2020: In March 2020, the CNN Fear and Greed Index fell below ten (extreme fear) due to the coronavirus panic. Investors who paid attention to such signals were able to buy stocks cheaply before markets recovered sharply in the following months.
Bitcoin peak 2021: In November 2021, the Fear and Greed Index in the crypto market reached over 90 (extreme greed), while Bitcoin hit an all-time high of over $69,000. Shortly afterwards, a major correction followed.

The Fear and Greed Index helps investors better understand market sentiment and make informed decisions. Anyone wanting to take advantage of current market opportunities and invest in Bitcoin, Ethereum (ETH) and other digital assets can do so easily and securely with Bitpanda. The platform offers a user-friendly way to buy, trade and hold cryptocurrencies long term – all without complicated processes.

Advantages and disadvantages of the Fear and Greed Index

Like any indicator, the Fear and Greed Index has both advantages and disadvantages that you should consider when making investment decisions. Only by carefully weighing the pros and cons will it provide you with valuable insights for your investment strategy.

Advantages:

Easy to interpret: The index summarises various indicators that reflect market sentiment into a single figure, making market analysis easier.
Early detection of trends: The Fear and Greed Index often shows exaggerated fear or greed and thus provides warning signals for upcoming market movements.
Broad applicability: The Fear and Greed Index can be used for various markets such as stocks, crypto and bonds.

Disadvantages:

Not a standalone trading indicator: The Fear and Greed Index doesn't take into account fundamental data such as company valuations or macroeconomic developments.
Reactive rather than predictive analysis: The Fear and Greed Index measures current market sentiment but does not offer a direct forecast of future developments.
High volatility in the crypto market: While the index has proven effective for traditional markets, it can provide short-term false signals during volatile crypto phases.

Conclusion: Don’t let fear and greed influence your trading

The Fear and Greed Index provides valuable insights into the emotional state of markets. As an indicator, it can help investors make investment decisions by showing when the market might be overheated or undervalued. Particularly for crypto and stock markets, the index delivers useful results to make investment strategies more strategic. In general, it can help investors better assess the mood of the market.

Nevertheless, you should not view the index in isolation. Market movements depend on many factors, including economic data, corporate earnings and geopolitical events. The best trading strategy is to combine the Fear and Greed Index with other forms of analysis and not rely solely on market sentiment.

Frequently asked questions about the Fear and Greed Index

Would you like to learn more about the Fear and Greed Index and its significance? Then feel free to check out our answers to the most frequently asked questions on the topic.

What does the Fear and Greed Index indicate?

The index measures how investors react to current market developments and whether emotions are excessively influencing the market. During phases of extreme fear, many investors sell in panic, which often leads to price declines. Extreme greed, on the other hand, means that many market participants are buying euphorically, which can lead to overvalued prices. A medium index value indicates a balanced sentiment. The Fear and Greed Index does not provide a direct recommendation to buy or sell, but rather helps to better assess the market environment. Especially if you want to know – where is the Fear and Greed Index today – you should compare the current value with those from previous days or months.

Is the Fear and Greed Index reliable during exceptional events?

The Fear and Greed Index is based on historical market patterns and can therefore be skewed during times of exceptional events. Examples of such phases include economic crises, sudden interest rate hikes or geopolitical conflicts.

Corona crash 2020: The index showed extreme fear, but the market recovered faster than expected.
Crypto crash after FTX collapse: The index dropped sharply, but the bottom was hard to predict after the crypto exchange FTX filed for bankruptcy in November 2022 due to severe liquidity problems and allegations of mismanagement.
Sudden regulatory interventions: The 2021 Bitcoin ban in China, for example, led to massive fear, but the market later stabilised.

While the Fear and Greed Index offers helpful signals, it should be supplemented with additional market indicators during times of crisis.

Who provides the Fear and Greed Index?

The most well-known provider is CNN, which calculates the index for the stock market. The CNN Fear and Greed Index is based on market data such as volatility, trading volume and demand for safe assets. In the cryptocurrency space, there's a separate version, such as the Crypto Fear and Greed Index. It uses specific crypto data like Bitcoin dominance, social media trends and market volatility. Both indices are publicly accessible and can serve as guides for market sentiment. You can always check with the respective providers to see the current status of the Fear and Greed Index.