Cryptocurrency market sentiment sank to its bleakest 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 categorized as “extreme fear” and which has historically only appeared during major crises in market sentiment.
The index stood at 12 the day before, 16 last week and 42 last month, suggesting how quickly traders have gone from cautious to overtly defensive.
The fear indicator is primarily based on bitcoin and combines several indicators that attempt to quantify investors’ mood rather than price direction. Includes volatility and dips, market momentum and trading volume, social media engagement, bitcoin dominance, and Google Trends data linked to bitcoin-related searches.
A sharp rise in volatility, an increase in defensive positioning, and a surge in fear-driven search interest typically push the index lower.
The collapse in sentiment comes as bitcoin briefly traded near $60,000 in late US trading on Thursday before recovering towards $65,000, a sharp move that reflected both forced liquidations and opportunistic buying on dips.
While the rally suggests that some buyers are willing to approach important psychological levels, the sentiment reading implies that the broader market remains in “sell first, ask questions later” mode.
In past cycles, extreme fear has often coincided with local lows, largely because panic conditions tend to drive out leveraged traders and short-term holders. But that’s not a rule, and it’s best to read the index as a snapshot of stress rather than a timing tool.
However, the index does not predict where Bitcoin will go. But it does show that the market has returned to the kind of fear typically reserved for systemic events.
