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Investor sentiment across the digital asset market has deteriorated sharply, with the Crypto Fear and Greed Index sinking to its lowest level in more than three and a half years, underscoring the severity of the current downturn.
The slide comes as Bitcoin plunged to a 15-month low this week, derivatives markets showed a retreat in speculative risk-taking, and global macroeconomic stress weighed heavily on investor confidence.
The selloff intensified on Thursday as Bitcoin fell to $60,255, representing a 52.2% decline from its October 2025 all-time high of $126,080, according to CoinGecko data.
At the same time, the Crypto Fear and Greed Index dropped to a reading of 9, placing it firmly in “Extreme Fear” territory and marking its lowest point in 42 months levels last recorded during the collapse of the Terra Luna ecosystem in mid-2022.
The plunge in the Crypto Fear and Greed Index reflects a convergence of price weakness, volatility spikes, and a defensive shift in derivatives markets. Analysts say the current sentiment mirrors previous periods of systemic stress, when liquidity tightened and risk assets sold off in tandem.
Terra Luna’s implosion in May 2022, triggered by the failure of its algorithmic stablecoin to maintain a dollar peg, remains one of the most traumatic episodes in crypto history.
Comparisons to that period highlight how far confidence has fallen. “Looking back at this drawdown, it vividly reflects a core reality: in an environment where broad liquidity has not expanded meaningfully, global assets are being governed by the same tightening financing conditions and risk-aversion logic,” — Tim Sun, Senior Researcher, HashKey Group.
Market participants note that the Crypto Fear and Greed Index has become a widely watched barometer not only for crypto-native sentiment, but also for how digital assets respond to global financial conditions. Its current reading suggests investors are bracing for further downside rather than positioning for a near-term rebound.
Analysts point to a combination of Federal Reserve policy uncertainty, a strengthening U.S. dollar, and spillovers from global bond and technology sector stress as key drivers behind the sharp decline.
The U.S. Dollar Index (DXY) climbed from 95.205 on January 27 to 97.685 this week, tightening financial conditions and putting pressure on dollar-denominated risk assets, including cryptocurrencies.
The dollar’s rally followed turbulence in Japanese government bond markets in January, which threatened to unwind parts of the global yen carry trade and sent shockwaves through global markets. These developments have reinforced a risk-off environment, amplifying the signals already flashing from the Crypto Fear and Greed Index.
Macroeconomic sensitivity remains a defining feature of the current cycle. “Macroeconomic factors play an outsized role in this downturn, as crypto continues to trade with strong correlation to equities and sensitivity to monetary policy signals,” — Nick Ruck, Director of LVRG Research.
As traditional markets wobble, crypto assets have struggled to decouple, undermining the narrative that Bitcoin can act as a macro hedge during periods of financial stress.
Beyond spot prices, derivatives markets offer further evidence of investor caution. Aggregated open interest for Bitcoin futures has fallen to $21.96 billion, a 15-month low, according to CryptoQuant data. The decline points to a significant reduction in leveraged positions, as traders exit speculative bets amid rising uncertainty.
Options markets paint an equally defensive picture. Bitcoin’s 7-day and 30-day 25-delta skew have dropped below -28 and -24 respectively, indicating that traders are paying steep premiums for downside protection. Such positioning typically aligns with periods when the Crypto Fear and Greed Index is deeply negative, reinforcing the broader message of heightened fear.
According to analysts, concerns extend beyond crypto-specific factors. “The primary driver is the risk-off wave from tech/AI sector fears,” — Andri Fauzan Adziima, Research Lead, Bitrue. “Investors increasingly doubt the sustainability of Big Tech’s massive AI capex.”
These doubts have spilled over into crypto markets, where high-beta assets are often among the first to be sold during global risk retrenchment.
Historically, extreme readings on the Crypto Fear and Greed Index have preceded periods of stabilization or recovery, though not without further volatility. Some long-term investors view such levels as contrarian indicators, while others warn that sentiment can remain depressed for extended periods when macro headwinds persist.
For now, the index underscores a market gripped by caution, with traders prioritizing capital preservation over aggressive positioning. Until clarity emerges around monetary policy, global growth prospects, and financial system stability, analysts say the Crypto Fear and Greed Index is likely to remain a central reference point for gauging market psychology.
As Bitcoin and the broader crypto market navigate one of their most challenging sentiment environments since 2022, the depth of fear captured by the Crypto Fear and Greed Index highlights just how closely digital assets remain tied to the rhythms of the global economy.
