Bitcoin Crashes and Extreme Fear Returns

While traditional markets waver under the weight of macroeconomic uncertainties, the crypto ecosystem is going through an unprecedented zone of turbulence. Bitcoin falls below $104,000, dragging all other assets in its wake. However, this correction goes beyond simple usual volatility. Investor sentiment plummets, swinging from optimism to extreme fear in a matter of days. This sudden reversal marks a major trend break, which could well redefine market balances in the short term.

Market sentiment swings into extreme fear

The crypto market is going through a period of acute tension. The Crypto Fear & Greed Index, a psychological barometer well known to investors, has moved into the zone of “extreme fear”with a score of 21.

This level marks a clear break with previous weeks, where the indicator was still flirting with the so-called zone of “greed”. This reversal reflects a growing distrust that goes beyond just price variations. Indeed, this drop in sentiment results from a set of converging signals. Daily analysis of six variables revealed widespread degradation:

• Volatility: highly high, which accentuates the uncertainty of the players;

• Volume and momentum: in free fall, evidence of a weakening of purchasing dynamics;

• Social indicators: in sharp decline, according to aggregated platform data;

• The dominance of bitcoin: increasing, reflecting a flight of capital from altcoins to BTC;

• Sentiment surveys: responses point to increased distrust, consistent with the general climate.

Through this on-chain data, the market seems to have shifted into a phase of defensive withdrawal. The optimistic narrative that predominated, institutional adoption, advances in ETFs, Web3 innovation, is now supplanted by a precautionary logic.

Investors are reassessing their positions, often urgently, in the face of increasing volatility and degraded technical signals. Extreme fear may be a sign that investors are too worried. This may represent a buying opportunity.

A wave of sales: long-term investors liquidate $40 billion

In this already tense climate, a major fact has amplified the pressure. Long-term bitcoin holders sold around 405,000 BTC in October, representing nearly $40 billion in outflows.

These massive sales weigh all the more on prices since, at the same time, inflows linked to ETFs and DATs (Digital Asset Trusts) only represented a cumulative volume of around 4 billion dollars. This imbalance between supply and demand has mechanically weakened price support.

Bitcoin thus slipped below $104,000, reaching $101,497, a drop of 5.6% over the day and 17.5% since its historic peak reached in early October. This fall is explained by a combination of factors, including a persistent crisis in DeFi and widespread macroeconomic concerns prompting investors to reduce their exposure to risk. On Monday, liquidations reached $1.2 billion, affecting 90% of long positions, proof of the violence of the current movement.

These events raise questions about the immediate future of the market: does the current purge constitute a simple adjustment or the start of a more lasting phase of decline? Some observers already see this as a signal of future accumulation, assuming that long-term investors have exhausted their selling capacity. Once these holders finish selling, or take a break, a new base could form to allow the price of bitcoin to start rising again. However, in the absence of clear catalysts, the market could remain in this weak zone for several more weeks.