Crypto market sentiment has plummeted to its darkest level since the FTX collapse after Bitcoin’s sharp decline this week dragged down prices across the board and forced a wave of deleveraging.
The widely followed Crypto Fear and Greed Index fell to 9 on Friday, a reading classified as “extreme fear” and which has historically only appeared during major breakdowns in market confidence.
The index stood at 12 the day before, 16 last week and 42 last month, suggesting how quickly traders moved from caution to defensive.
The Fear Indicator is built primarily around bitcoin, combining several indicators that attempt to quantify investor sentiment rather than price direction. It includes volatility and drawdowns, market dynamics and trading volume, social media engagement, Bitcoin dominance, and Google Trends data related to Bitcoin-related searches.
A sharp increase in volatility, an increase in defensive positioning, and an increase in interest in fear-driven searches generally push the index lower.
The collapse in sentiment comes as bitcoin briefly traded near $60,000 late Thursday in the United States before rebounding toward $65,000, a sharp move that reflects both forced liquidations and opportunistic buying on the dip.
While the rebound suggests that some buyers are ready to break through psychological levels near major levels, sentiment analysis implies that the market as a whole remains in “sell first, ask questions later” mode.
In past cycles, extreme fears have often coincided with local lows, largely because panic conditions tend to drive out leveraged traders and short-term security holders. But that’s not a rule, and the index is best read as a snapshot of stress rather than a timing tool.
However, the index does not predict where Bitcoin will go. But it shows that the market has returned to the type of fear usually reserved for systemic events.
