PARTIAL · weak contrarian
Hypothesis
The composite Fear & Greed index at extremes ("Extreme Fear" / "Extreme Greed") is a contrarian signal for multi-day reversals.
Math: extreme-tail conditioning
$$ \text{long if } \text{FNG}_t < 10,\quad \text{trim if } \text{FNG}_t > 90 $$
Method
Daily FNG since 2018; forward 7/14-day BTC returns conditioned on tail buckets.
Results
| Extreme Fear → fwd 14d | mildly positive |
| Extreme Greed → fwd 14d | mixed |
| Edge vs buy-and-hold | small |
A mild, real contrarian tilt at the fear extreme on multi-day horizons, but the index is itself ~25% price-derived (reflexive), so much of the "signal" is just buying dips. Marginal lean, not a system.
Composite sentiment indices that include price as an input will always "predict" mean reversion, because they partly are the price. Strip the circular inputs before believing the backtest.