Do bitcoin returns move sentiment? Evidence from the crypto fear & greed index

We study whether daily changes in investor sentiment, measured by the Crypto Fear & Greed Index (FGI), predict Bitcoin returns, and whether returns move sentiment. Using 2018–2025 daily data and a small VAR, we find: (i) ∆FGI does not Granger-cause returns and offers no out-of-sample forecasting gain; (ii) returns do Granger-cause ∆FGI. A return shock produces a sharp, transitory swing in sentiment, while a sentiment shock has economically negligible effects on returns. Results are robust to weekly aggregation, adding VIX and Economic Policy Uncertainty (EPU), pre/post-2021 splits, high- vs. low-VIX days, and asymmetric (positive/negative) return moves. We conclude the FGI mostly reacts to prices and has limited value for predicting daily Bitcoin returns. We also find that Bitcoin returns lead sentiment, and sentiment adds little to next-day return predictability.