What is a Fear and Greed Index?

The CNN Business Fear & Greed Index is a daily scale (0–100) designed to reveal prevailing investor psychology in U.S. stock markets—0 for “Extreme Fear,” 50 for neutral, and 100 for “Extreme Greed.”

How CNN Quantifies It

The index is an equally‑weighted average of seven market indicators, each rescaled to a 0–100 subscore:

• Market Momentum: S&P 500 vs. its 125‑day moving average.
• Price Strength: Number of NYSE-listed stocks hitting 52‑week highs vs. lows.
• Price Breadth: Advancing‑stock volume vs. declining‑stock volume on the NYSE.
• Put/Call Ratio: Elevated ratios imply fear (more puts than calls).
• Market Volatility (VIX): Higher readings reflect nervousness.
• Safe‑Haven Demand: Bond performance vs. equities—bond strength signals fear.
• Junk‑Bond Demand: Narrow high‑yield/investment‑grade spread suggests appetite for risk.

Subscores are averaged to produce the daily index reading.

How to Interpret the Score

The index is often used for contrarian signals:

• ⟶ Below 25 : Extreme Fear—potential buying opportunity.
• ⟶ 25–49 : Fear.
• ⟶ Around 50 : Neutral sentiment.
• ⟶ 51–75 : Greed.
• ⟶ Above 75 : Extreme Greed—possible overbought territory.

Important: this index captures sentiment—not intrinsic value—and doesn’t predict timing.

The Crypto Version (Alternative.me)

Alternative.me’s Crypto Fear & Greed Index applies the same concept to the Bitcoin market via six weighted metrics:

• Volatility (25%): 30‑ and 90‑day BTC price swings vs. averages.
• Momentum & Volume (25%): Exchange turnover and price moves across recent history.
• Social Media Activity (15%): Twitter metrics and public engagement on crypto-related tags.
• Surveys (historically 15%): Public crypto sentiment polls (now paused in updates but formerly included).
• Dominance (10%): BTC’s share of total crypto market cap; rising dominance implies flight to safety.
• Google Trends (10%): Search volume trends for terms like “buy bitcoin” or fear-related queries.

These are scaled to a 0–100 composite on a 12-hour update cycle.

Limitations & Best Practices

• Lagging inputs: Many signals (e.g. moving averages, volumetric spreads) respond to sentiment shifts after the fact.
• Asset‑class biases: CNN’s model is stock-specific; Alternative.me’s is Bitcoin‑centric.
• Persistence of extremes: “Extreme Fear” or “Greed” can persist—don’t assume an immediate price reversal.
• Not predictive: These indices reflect what emotions are already present—not what prices will do tomorrow.

Further Reading (English)

• Investopedia: What Is the Fear & Greed Index and How It Works
• SoFi: Guide to the Fear & Greed Index
• Alternative.me: Crypto Fear & Greed Index