DeFi Sentiment Analysis: Fear & Greed Index

Live Market Analysis

The DeFiStar Fear & Greed Index serves as a robust hourly crypto market sentiment tracker. Unlike traditional equity indices which rely on survey data, this tool uses a strictly quantitative model derived from on-chain data points to measure the actual behaviour of capital in the decentralised finance ecosystem.

Current Market Outlook: The compressed yield spread (0.31%) suggests a 'flight to quality'. Note: Internal metrics diverge from global sentiment (24). The index score of 47 reflects this aggregate sentiment.

The Core Pillars of DeFi Sentiment Analysis

1. Yield Appetite (Weight: 35%)

We calculate the 24-hour average spread between "Blue Chip" yields (safety score ≥80: Aave/Compound on Ethereum) and "Degen" yields (safety score ≤60, TVL >$50k). When this spread widens significantly above 2.5%, it indicates investors are rotating into riskier assets (Greed). When it compresses below 1.5%, capital is fleeing to quality (Fear).

2. Leverage Demand (Weight: 30%)

High global utilisation rates (24-hour average, excluding Maker DSR) indicate borrowers are aggressively leveraging positions, usually to go long on crypto assets. Normal range is 30-70%, with 50% being neutral. Above 70% signals maximum conviction, while below 30% suggests deleveraging or risk-off sentiment.

3. Capital Momentum (Weight: 35%)

We perform linear regression analysis on 48 hours of TVL data (hourly buckets), filtering out incomplete data snapshots. The slope is projected forward 24 hours and converted to a percentage change. Positive momentum (>1% daily projection) signals confidence (Greed), while negative momentum (<-1% daily) signals capitulation (Fear).

4. Systemic Stability (Penalty System)

If major stablecoins (USDC, USDT, DAI, FRAX, LUSD) deviate more than 1.2% from their $1.00 peg (below $0.988 or above $1.012), our algorithm applies exponential penalty points (up to 20 per asset), instantly pushing the index towards "Extreme Fear" regardless of other metrics. This acts as an emergency brake on sentiment scoring during systemic crises.

Scoring Methodology (Transparent Formula)

The index begins at a base score of 50 (Neutral), then applies the following adjustments:

Utilisation Component: (Global Util % - 50) × 0.8, capped between -25 and +25 points
Yield Spread Component: (Yield Spread % - 2.5) × 2.5, capped between -20 and +30 points
TVL Momentum Component: Projected Daily Change % × 2, capped between -25 and +25 points
Peg Stability Penalty: Up to -20 points per stablecoin deviation >1.2% from $1.00

Example: With current values (Util: 71.7%, Spread: 0.31%, Momentum: +0.00%).
Internal Raw: 62. Weighted: (62 × 60%) + (Ext. 24 × 40%) = 47.

Market Psychology Deep Dive

Understanding the nuance between TVL Flows and Yield Spreads is critical for interpreting this index. A common pattern observed in DeFi is the "Liquidity Divergence." This occurs when prices of major assets (ETH/BTC) are stagnant or dropping, yet Utilisation Rates (Global: 71.7%) begin to climb. This typically signals that sophisticated actors are borrowing stablecoins to accumulate positions at lower prices, anticipating a reversal.

Why Yield Spread Matters

The Yield Spread (currently 0.31%) is the most direct proxy for investor risk tolerance. In a "Fear" state, the spread collapses as liquidity providers withdraw from high-APY, unproven protocols and stack stablecoins in audited, blue-chip lending markets. Conversely, in a "Greed" state, the hunt for alpha forces capital further out on the risk curve, accepting smart contract risk in exchange for double-digit returns.

Linear Regression for TVL Trends

Unlike simple percentage comparisons that can be distorted by single outlier data points, we use least squares linear regression across 48 hours of TVL snapshots. This smooths out scraper irregularities and provides a statistically robust trend line. The slope of this line is then projected forward 24 hours to estimate capital flow velocity, giving a more accurate picture of market momentum than point-to-point comparisons.

For more granular data on which protocols are driving these trends, visit our Protocol Leaderboard or analyse stability metrics via the Yield Stability tracker.

Real-time Stablecoin Yields Tracker

DeFi Fear & Greed Index

30-Day Historical Trend

Component Breakdown