Recently, there's an interesting phenomenon: many people find that the Fear and Greed Index still works for Bitcoin, but it becomes completely useless when applied to altcoins. Using this index to buy the dip in Bitcoin has yielded nearly 8% returns so far; at the same time, buying altcoins generally results in slight declines or sideways movement. The real issue isn't your trading strategy, but the inherent flaw in the index's design.

To put it simply, the Fear and Greed Index has never been an "all-market sentiment indicator." It's more like a highly specialized sentiment tool focused on Bitcoin. Core data such as price momentum, volatility, and derivatives metrics are almost entirely centered around BTC, with at most Ethereum included. Altcoins are simply not factored into the weighting. Now that capital flows are shifting, with funds continuously draining from altcoins, this index naturally only provides meaningful reference for Bitcoin's price movements.

A deeper issue lies in the capital ecosystem disruption brought about by the ETF era. Looking back at the 2020-2021 cycle, the market was mainly driven by retail investors, and capital flowed like water—initially pushing Bitcoin up, then spilling over into Ethereum, and finally into SOL and various small- and mid-cap coins, leading to a true Altseason. But from 2024 to 2026, the composition of incremental funds has completely changed. New capital mainly comes from ETFs and institutions, which are subject to strict compliance restrictions—they can only allocate to Bitcoin, occasionally Ethereum or Solana, but it's impossible for them to flow into small- and mid-cap altcoins.

As a result, we see this situation: when the Fear and Greed Index flashes "Extreme Fear," the actual capital entering the market is institutional funds, which simply push Bitcoin higher. There are no retail investors to follow suit in altcoins; instead, altcoins continue to decline as Bitcoin "sucks blood." It's not that the market isn't coming; rather, the entire participant structure has fundamentally changed.

So, how should one interpret this market in practical trading? The most effective indicator is actually quite simple—look at the price ratio between Ethereum and Bitcoin. If this ratio keeps declining, it indicates that the market simply isn't buying into the so-called risk assets beyond Bitcoin. In this macro context, trying to force altcoins is essentially going against the flow of capital—pure contrarian trading. Instead of obsessing over this, it's better to participate directly in assets like Bitcoin that are strongly linked to global macro cycles. Even with some leverage, the certainty of gains is much higher.

Another auxiliary signal worth paying attention to is Google search volume. When Bitcoin's search interest starts to rise significantly, it generally means real retail users are entering the market, providing support for risk assets. Before this critical point arrives, the volatility in fear and greed data has little to no reference value for altcoins.