🧮 Science Popularization: What is the 'Fear & Greed Index'? Why might it be a good thing that it has dropped to 8?

Recently, everyone has been frequently seeing the term 'Fear & Greed Index', so today we'll do a simple science popularization.

📌 What is the Fear & Greed Index?

The Fear & Greed Index, compiled by Alternative.me, ranges from 0 to 100:

• 0-24: Extreme Fear

• 25-49: Fear

• 50: Neutral

• 51-74: Greed

• 75-100: Extreme Greed

📊 How is it calculated?

It takes into account the following 6 dimensions:

1. Volatility (25%): BTC's volatility over the last 30/90 days

2. Market Momentum/Volume (25%): Current trading volume vs historical average

3. Social Media (15%): Discussion heat on platforms like Twitter

4. Surveys (15%): Investor sentiment surveys

5. BTC Dominance (10%): Changes in BTC's dominance

6. Google Trends (10%): Search volume related to cryptocurrencies

📈 Historical Patterns:

• Buy BTC when the index is below 15, with a median 90-day return of +38.4%

• March 2020 (index=8) → 6 months later +133%

• November 2022 FTX collapse (index=10) → 6 months later +96%

• Current index=8, extreme fear for 46 consecutive days (the longest in history)

⚠️ Important Reminder: The Fear & Greed Index is an emotional indicator, not a trading signal. In 2022, when the Terra/Luna collapse occurred, the index was 6, but BTC still fell by 4.5% six months later. The key is to determine whether there are structural risks.

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