Cryptocurrency market sentiment has deteriorated sharply, with the Fear & Greed index falling to 10, a level indicating “extreme fear,” marking a nearly nine-month low as it is the lowest reading since late February.
The drop in sentiment follows a week of losses in major cryptocurrencies, led by bitcoin falling to just under $96,000 in a major sell-off that, for the second time this month, saw the cryptocurrency fall below the $100,000 mark.
The index, a popular indicator of investor emotions, reflects growing unease as bitcoin lost more than 5% over the past seven days. The largest cryptocurrency is now trading at levels not seen since early March, following a steady decline from its all-time high above the $120,000 level.
The broader crypto market, measured via the CoinDesk 20 Index (CD20), also lost around 5.8% of its value over the week.
“The liquidation is a confluence of profit-taking by LTH, institutional exits, macroeconomic uncertainty and leveraged long positions being eliminated,” Jake Kennis, senior research analyst at Nansen, said in an emailed statement. “What is clear is that the market has temporarily chosen a bearish direction after a long period of consolidation/variation.”
Factors behind the sell-off also include fading hopes for an interest rate cut by the Federal Reserve this month; CME’s FedWatch tool now puts the odds of a 25 basis point cut near 50%. On prediction markets like Kalshi and Polymarket, traders weight similar probabilities.
On top of this, the White House said recent key economic indicators, including October inflation, may not be released at all due to delays caused by the recently ended government shutdown. This means traders have less macro data to work with.
The icing on the cake comes in the form of low liquidity, as the market has yet to fully recover from the large drop seen in October, and order book depth on major centralized exchanges has remained structurally lower since then.
Read more: Cryptocurrency liquidity remains tight after October crash, risking sharp price swings
