Bitcoin Fear & Greed Index Plunges to “Extreme Fear” as Markets Drop 10%

TLDR

Bitcoin Fear & Greed Index has fallen to 25, signaling “Extreme Fear” in the market

Bitcoin price dropped below $90k for the first time since August 2024

Last time the index hit this level, it preceded a 78% surge to about $88k

Over $1 billion has been withdrawn from Bitcoin ETFs in the last two weeks

The index dropped sharply from 49 to 25 in just one day, one of the steepest declines since September

The Bitcoin Fear & Greed Index has plummeted into “Extreme Fear” territory, hitting 25 as Bitcoin slid below $90,000 for the first time since August 2024. This sharp decline represents one of the most dramatic sentiment shifts in recent months, with the index falling from 49 just yesterday.

The Fear & Greed Index is a popular market sentiment tool that analyzes social media posts, price volatility, market trends, and other factors to gauge how crypto traders are feeling. A reading below 30 indicates “Extreme Fear,” while readings above 70 suggest “Greed.”

This current fear level comes as the overall cryptocurrency market saw a 10% drop in total value over the past 24 hours. Major cryptocurrencies felt the impact, with Bitcoin dropping below the $90,000 mark and other tokens like Solana (SOL) and XRP falling more than 14%.

Market experts point to several factors driving this sudden shift in sentiment. Investors have pulled over $1 billion from Bitcoin ETFs in the past two weeks. This outflow represents an important change since ETFs were a major driver of Bitcoin’s rise earlier this year.

The current situation creates an interesting contrast with recent market history. The last time Bitcoin was priced around $88,000, in November, the Fear & Greed Index registered a reading of 73, which falls into the “Greed” category. This means that just five months ago, Bitcoin buyers felt confident purchasing at $88,000, while today they show extreme fear at similar price levels.

Looking back further, the last time the index reached such low levels preceded a strong market recovery. Following a similar “Extreme Fear” reading, Bitcoin surged 78% to around $88,000 by November. This pattern suggests that extreme fear periods have often marked good buying opportunities in the past.

Historical data shows that Bitcoin typically doesn’t stay in “Extreme Fear” territory for extended periods. Recovery from extreme fear to greed has usually taken less than two months, with each recovery leading to new all-time highs. The exception was during the 2022 bear market, when it took over a year for sentiment to recover.

“I’ve seen this movie too many times. People wish for lower prices. When they get them, they lose faith and find new reasons to doubt. Then it rips. By the time they convince themselves to buy, it’s already at new ATHs. Losers wait for confirmation while winners act before it.”

The past 18 months have seen Bitcoin experience a remarkable rise, driven by several key events. BlackRock’s initial spot ETF filing created bullish sentiment that continued through to the acceptance and launch of these ETFs. Donald Trump’s victory in the 2024 presidential election provided another catalyst, helping Bitcoin finally break through the $100,000 mark.

Now, however, the market seems to be lacking new catalysts to maintain that momentum. This absence of fresh positive drivers, combined with the ETF outflows, has contributed to the current fearful market sentiment.

Financial Markets

The broader financial markets are showing similar stress signs. Nasdaq futures point to continued losses in technology stocks, while strength in the Japanese yen is raising concerns about risk aversion similar to what markets experienced last August.

Some traders view the extreme fear reading as a potential buying opportunity. Times of excessive fear often indicate that assets are oversold, which can lead to price rebounds. Market analysts note that in previous cycles, such extreme fear readings have sometimes preceded market recoveries.

Another potential positive factor is the poor economic data coming from the United States. Some traders believe this might force central banks to take steps to stimulate the economy, which could eventually fuel a market rally for risk assets like cryptocurrencies.

The dramatic one-day drop in the index from 49 to 25 shows how quickly market sentiment can shift. This is one of the sharpest declines since September and indicates a rapid move toward overly bearish feelings among traders.