Crypto Market Sentiment Hits Extreme Fear as Bitcoin Slide Triggers Deleveraging

Crypto market sentiment has plunged to its most pessimistic level since the FTX collapse, following a sharp bitcoin price drop that rippled across the digital asset market and triggered widespread deleveraging. The widely watched Crypto Fear and Greed Index fell to 9 on Friday, a level classified as “extreme fear” and historically associated with severe breakdowns in investor confidence.

The decline highlights how rapidly sentiment has deteriorated. Just one day earlier, the index stood at 12, compared with 16 last week and 42 a month ago. This swift shift underscores how traders have moved from cautious positioning to outright defensive behavior in response to heightened volatility and falling prices.

The Crypto Fear and Greed Index is designed to capture investor psychology rather than forecast price direction. It is largely bitcoin-focused and aggregates several indicators, including market volatility, recent drawdowns, trading volume and momentum, social media activity, bitcoin dominance, and Google Trends data related to crypto searches. When volatility spikes, defensive positioning rises, and fear-driven searches increase, the index typically drops sharply.

This latest collapse in sentiment coincided with bitcoin briefly falling near the $60,000 level during late U.S. trading hours on Thursday before rebounding toward $65,000. The rapid move reflected a combination of forced liquidations from overleveraged traders and opportunistic dip-buying by longer-term participants. While the bounce suggests some buyers are willing to step in around major psychological support levels, the broader market tone remains tense.

Historically, periods of extreme fear in the crypto market have sometimes aligned with local price bottoms, as panic selling tends to flush out leveraged positions and short-term holders. However, this pattern is far from guaranteed. The index should be viewed as a snapshot of market stress rather than a precise timing signal.

Although the Crypto Fear and Greed Index does not predict bitcoin’s next move, it clearly shows that the market has returned to a level of fear usually associated with systemic events. For investors, the current reading reflects a fragile environment where uncertainty dominates, risk appetite is muted, and sentiment remains deeply shaken across the crypto ecosystem.