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Extreme Fear Returns to Crypto: What Investors Should Know

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Extreme Fear in Crypto Markets

The Crypto Fear & Greed Index fell to 5 on Thursday, signaling a sharp deterioration in market sentiment as digital asset prices continue to slide.

The decline reflects intensifying panic among investors, with risk appetite eroding amid broader global market uncertainty.

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Crypto Sentiment Sinks Deeper Into “Extreme Fear” 

The Crypto Fear & Greed Index measures the overall emotional state of the cryptocurrency market on a scale from 0 to 100. Readings between 0 and 24 indicate Extreme Fear, 25 to 49 signal Fear, 50 represents Neutral conditions, 51 to 74 reflect Greed, and 75 to 100 denote Extreme Greed.

At 5, the index places the market firmly in Extreme Fear territory. The latest drop comes amid a steady decline in sentiment over recent weeks. 

Extreme Fear in Crypto Markets
Extreme Fear in Crypto Markets. Source: Alternative.me

A month ago, the index stood at 26, already within the Fear range. It slid to 12 a week earlier and registered 11 just a day before reaching its current low. The rapid deterioration highlights how quickly confidence has unraveled as prices weakened.

The collapse in crypto sentiment coincides with a broader surge in global economic anxiety, as evidenced by the World Uncertainty Index. The index tracks how frequently the term “uncertainty” appears in Economist Intelligence Unit country reports. 

It covers more than 140 countries and provides a quarterly, cross-country indicator widely used in macroeconomic research and global risk analysis.

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In the third quarter of 2025, the World Uncertainty Index surged to an all-time high above 100,000. In the fourth quarter, it was recorded at 94,947. 

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Those levels are roughly double the peaks observed during previous major crises, including the COVID-19 pandemic, Brexit, and the Eurozone debt crisis.

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“Rising geopolitical tensions, volatile markets, and policy uncertainty are driving the spike, as investors struggle to price in what comes next,” Coin Bureau wrote.

World Uncertainty Index
World Uncertainty Index. Source: Federal Reserve Bank of St. Louis

The elevated reading signals heightened anxiety across global markets as investors grapple with unpredictable economic and political conditions. Against this backdrop, the crypto market’s plunge into Extreme Fear reflects not only falling prices but also a broader retreat from risk assets worldwide.

Crypto Market Cap Falls 22% in 2026 as Bitcoin and Ethereum Extend Losses 

The collapse in sentiment comes as the broader crypto market continues to move downwards. In 2026, total market capitalization has fallen by more than 22%, reversing the optimism that defined the start of the year.

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Bitcoin, which began January on a stronger footing, ended the month down by more than 10%. It has dropped another 14.6% so far in February.

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Ethereum has also fallen 33.8% year to date. The sustained drawdown has weighed on market activity.

Analysts Weigh Crypto Market’s Next Move 

Amid these bear market conditions, the community remains uncertain about what comes next. Analyst Kyle Chassé pointed to historical precedents, noting that similarly depressed readings in the Crypto Fear & Greed Index were seen in 2018, March 2020, and in the aftermath of the FTX collapse in 2022.

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“Every time, it marked a massive opportunity window. No, it doesn’t guarantee the bottom. But historically, peak fear is where asymmetry lives,” he said.

Other analysts argue the current downturn could represent a shakeout phase before a potential breakout. Still, it remains unclear when, or if, a broader crypto market recovery will follow

Ray Youssef, CEO of NoOnes, has forecasted that Bitcoin could trade sideways until summer 2026. He noted that the exact location of the Bitcoin bottom remains unclear and that current dynamics increasingly suggest the market has entered a protracted reassessment of risk.

Youssef pointed to several structural factors, including US political and monetary cycles, persistent inflation constraints, weakened retail capital flows, and cautious institutional demand following heavy losses.

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“As a result, we are unlikely to see a V-shaped reversal before the summer of 2026. More likely, we will see regular rebounds, triggered by short-covering and short squeezes,” he told BeInCrypto.

According to Youssef, such rebounds could be strong, ranging between 20% and 30%, and potentially prolonged. However, he warned they may ultimately prove to be bull traps. 

He stated that crypto traditionally remains in a long accumulation phase within a single range before the start of a true bull market.

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Crypto World

CFTC Chair Says Agency is Ready to Oversee Entire Crypto Market

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CFTC Chair Says Agency is Ready to Oversee Entire Crypto Market

Michael Selig, US President Donald Trump’s nominee leading the Commodity Futures Trading Commission (CFTC), said the agency was prepared to oversee the entire $3 trillion crypto industry, with no timeline for Congress to pass a crucial market structure bill.

In a Wednesday statement about his first 100 days as CFTC chair, Selig said that the commission was “ready to take responsibility” for the crypto market and reiterated his claim that it was the sole regulator to oversee prediction markets.

His comments come as the US Senate considers the CLARITY Act, a crypto market structure bill that has been effectively stalled in committee amid discussions over stablecoin yield and other issues.

“The same regulatory clarity being delivered to the crypto industry is being developed for prediction markets, which can serve as powerful tools for information discovery and are regulated by the CFTC under the Commodity Exchange Act,” said Selig.

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Under Selig, who was confirmed by the Senate in December, the CFTC has adopted many policies signaling that the agency would soften its enforcement and regulation of digital assets compared to previous administrations. In March, the agency announced a memorandum of understanding with the Securities and Exchange Commission (SEC) as part of efforts to coordinate on regulation, including digital assets.

Related: Crypto exchange KuCoin agrees to $500K settlement, ending CFTC case

Although early drafts of the market structure bill suggested the legislation could give the CFTC additional authority to oversee digital assets, the SEC is expected to continue regulating cryptocurrencies it considers to be securities.

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Lawmakers pressing CFTC on insider trading claims over prediction markets

US state authorities and federal lawmakers have been targeting prediction market platforms like Kalshi and Polymarket over alleged violations of gaming laws and claims of politicians using insider information to profit.

While many of the state-level actions continue to be litigated in court, Selig has claimed that the CFTC has “exclusive jurisdiction” over prediction markets and threatened legal action against any challenges to its authority.

In a Tuesday event, CFTC enforcement director David Miller said that the agency’s position was that event contracts on prediction markets were not “gaming” but rather “swaps” that fall under its purview.

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Some lawmakers have also proposed legislation to ban elected officials with insider information from profiting from event contracts after suspicious trades on military actions involving Iran and Venezuela.

Magazine: A newbie’s guide to surviving crypto winter