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The Crypto Fear & Greed Index tumbled to 27 (“Fear”) over the weekend as its sharpest decline in half a year as China announced new export controls on rare earth magnets, sending shockwaves across both traditional and digital markets.
The move came after Beijing expanded its export restrictions to include five additional rare earth elements such as holmium and erbium, directly retaliating against U.S. President Donald Trump’s newly imposed 100% tariffs on Chinese goods.
The confrontation triggered an estimated $7 billion crypto sell-off, with over 1.66 million traders liquidated in just 24 hours. Data from CoinGlass shows that total liquidations topped $19.33 billion, one of the largest deleveraging events of 2025.
“Markets are now pricing in sustained geopolitical tension between the U.S. and China,” said Edward Moya, Senior Market Analyst at OANDA. “The rapid swing in the Crypto Fear & Greed Index mirrors the global flight to safety which investors are exiting risk assets fast.”
China’s latest restrictions extend existing export curbs, now covering products containing more than 0.1% Chinese-sourced rare earths. These materials are vital for electric vehicles, wind turbines, and advanced defense systems underpin critical industries across both economies.
With China dominating over 90% of global rare earth processing, the new controls could strain supply chains and increase manufacturing costs worldwide. According to Bloomberg, several Chinese magnet manufacturers have already reported delays in securing export licenses, with approval times extending beyond the usual 45-day review period.
Beijing’s Ministry of Commerce defended the move, calling it a “legitimate measure” to protect national interests. “China has consistently safeguarded its own national security and industrial sovereignty,” a spokesperson told Xinhua News Agency.
Meanwhile, President Trump accused China of “extraordinarily aggressive trade tactics,” announcing retaliatory tariffs on all Chinese imports. In a Truth Social post, he warned of potential U.S. export bans on critical software beginning November 1.
The tit-for-tat actions have amplified fears of a renewed trade war, pressuring both equity and crypto markets.
“Every escalation adds uncertainty, and uncertainty is poison for investor confidence,” said Kathy Jones, Chief Fixed Income Strategist at Charles Schwab.
The rare earth standoff reverberated throughout the crypto ecosystem, with the Crypto Fear & Greed Index amplifying bearish sentiment across major tokens.
According to CoinMarketCap, Bitcoin dropped 3.1% to around $113,600, briefly dipping below $111,700, while Ethereum slumped 5.1% to under $4,000 for the first time in weeks. XRP and Dogecoin plunged by more than 30%, marking one of their steepest single-day declines of the year.
The overall crypto market capitalization fell 3.2%, settling at $3.8 trillion, as leveraged traders were forced to unwind positions amid the geopolitical turmoil.
China’s rare earth decision is not just about trade as it’s about strategic leverage, explained Noelle Acheson, former head of research at Genesis Trading. As the Crypto Fear & Greed Index sinks, it reflects how deeply macroeconomic shocks now influence digital asset sentiment.
The crypto downturn also mirrored trends in global commodities. Gold prices surged to a record $4,200 per ounce, and silver climbed to $51.70, underscoring a flight toward safe-haven assets.
Analysts warn that China’s export controls could ripple into the crypto mining sector, given the importance of rare earth materials in GPU and ASIC chip production. Tighter export reviews could increase hardware costs and temporarily affect network hash rates, particularly in Bitcoin and Ethereum mining operations.
The rare earth choke point highlights a vulnerability in crypto’s infrastructure chain, said Jason Urban, co-CEO at Galaxy Digital Trading. If supply constraints persist, mining profitability could fall, and that would likely push the Crypto Fear & Greed Index even lower.
Adding to investor uncertainty, Federal Reserve Chair Jerome Powell is expected to speak at the NABE Annual Meeting in Philadelphia on Tuesday. Markets will watch closely for clues on upcoming interest rate decisions, which could influence risk appetite across asset classes.
If Powell signals caution or hints at tighter policy, we may see another leg down in crypto prices, said Lindsey Bell, Chief Strategist at CFRA Research. The Crypto Fear & Greed Index would likely stay deep in fear territory until geopolitical and monetary clarity returns.
Despite a brief moment of calm over the weekend when Trump softened his rhetoric, calling President Xi Jinping “highly respected” market confidence remains fragile. The Crypto Fear & Greed Index continues to hover around its lowest reading since April, signaling persistent caution among retail and institutional traders alike.
For crypto investors, the key question is whether this sentiment slump will evolve into a prolonged risk-off cycle or a short-lived panic. With rare earth policies tightening and trade rhetoric heating up, analysts warn that volatility is likely far from over.
As of Tuesday morning, the Crypto Fear & Greed Index remains firmly in “Fear” territory as a sobering reminder that geopolitical tremors are now inseparable from crypto’s financial heartbeat.
