Fear and Greed Index

Definition ∞ The Fear and Greed Index is a tool that measures investor sentiment in financial markets. This indicator assesses the prevailing emotional state of market participants, typically ranging from extreme fear to extreme greed, by analyzing various market factors. Components often include market momentum, trading volume, volatility, social media sentiment, and dominance of specific assets. A high greed reading suggests potential market overheating, while a high fear reading may signal overselling opportunities.
Context ∞ In cryptocurrency news, the Fear and Greed Index is widely referenced to provide a snapshot of collective investor psychology, particularly for Bitcoin. It helps market observers gauge whether the market is overly optimistic or pessimistic, which can sometimes precede significant price movements. While not a definitive trading signal, it offers a valuable perspective on the emotional drivers influencing digital asset valuations.