CMC Crypto Fear and Greed Index

The CMC Fear and Greed Index can be used in several ways:
  • Market Sentiment Analysis: By observing the current value of the index, you can gauge the overall mood of the cryptocurrency market. For example, a high value suggests that investors are overly greedy, which may indicate that the market is overheated and due for a correction. Conversely, a low value may suggest that fear is driving prices down, potentially creating buying opportunities.
  • Contrarian Strategy: Some investors use the index as part of a contrarian investment strategy. The idea is to "be fearful when others are greedy and greedy when others are fearful." If the index shows extreme greed, it might be a signal to consider selling assets, while extreme fear could indicate a buying opportunity.
  • Complementary Analysis: Use the index alongside other analytical tools and indicators to make more informed decisions. It’s important to remember that the index is a tool for gauging sentiment and should not be used in isolation.

The CMC Fear and Greed Index is calculated using five key components:
  1. Price Momentum: This factor analyzes the price performance of the top 10 cryptocurrencies by market capitalization (excluding stablecoins). It assesses how these coins are performing relative to each other and the broader market.
  2. Volatility: The index incorporates Volmex Implied Volatility Indices (BVIV and EVIV) for Bitcoin (BTC) and Ethereum (ETH), which provide forward-looking measures of expected volatility over the next 30 days.
  3. Derivatives Market: The index considers the Put/Call Ratio in the Bitcoin and Ethereum options markets. A higher ratio of puts to calls indicates more fear in the market, suggesting bearish expectations among investors.
  4. Market Composition: This component looks at the relative value of Bitcoin (BTC) in the market, using the Stablecoin Supply Ratio (SSR) to measure the ratio between Bitcoin’s market capitalization and that of major stablecoins.
  5. CMC Proprietary Data: The index also uses social trend keyword searches and user engagement metrics to capture market sentiment, retail interest, and emerging trends.