The recent crypto market sentiment collapse has triggered a drastic drop in the Fear and Greed Index to levels of 24 points this Wednesday. According to Kamina Bashir, this reversal toward extreme fear occurs after a loss of 120 billion dollars in total capitalization, driven by tariff uncertainty and growing global geopolitical tensions that are currently haunting international investors.
During the session, Bitcoin dropped from the psychological mark of 90,000 dollars, even briefly touching 88,000 dollars on some trading platforms. This selling pressure intensified after statements by Scott Bessent, US Treasury Secretary, who reaffirmed the use of tariffs as a political tool, which generated a massive flight toward traditional safe haven assets during the early hours of the day.
For its part, the derivatives market experienced a technical carnage with the forced liquidation of more than 182,000 traders in just twenty-four hours. By adding losses of 1.08 billion dollars, it is evident that long positions suffered the greatest negative impact, proving that last week’s excess of optimism has been replaced by a generalized and worrying apathy among retail and institutional participants.
Tensions in Davos and the end of optimistic narratives
Furthermore, the Davos environment became the epicenter of distrust when US authorities confirmed their readiness to deploy aggressive trade policies against the European Union. This scenario has caused blockchain technology to be temporarily viewed with skepticism, as investors prefer to take refuge in commodities and stocks for fear of a global and unpredictable scale trade war.
Even veteran ecosystem participants seem to be losing faith in the long-term promises that used to sustain prices in previous years. Some analysts suggest that current sentiment is worse than after the FTX crash, because there is a deep disillusionment with the sector’s fundamentals, which makes the entry of new institutional capital difficult in the short term.
Will the industry be able to regain confidence in such a hostile macroeconomic outlook?
Therefore, the future direction of prices will depend exclusively on how geopolitical and macroeconomic developments evolve in the coming trading weeks. Nevertheless, some experts maintain that cryptocurrencies remain the best asymmetric bet in the capital markets, arguing that extreme pessimism usually precedes the most lucrative buying opportunities for resilient investors during these volatile times.
However, the Fear and Greed Index remains in a danger zone not visited since periods of high systemic volatility. In this way, the lack of interest in angel investments and the rejection of common narratives suggest that the market must purge its current excesses, looking for a solid floor where stability can finally return to the digital assets most important to the global financial system.
Finally, volatility will remain high while regulatory and commercial clarity continues to be an unknown for traders around the whole world. Hence, analysts recommend extreme caution, since the fragility of investor sentiment is evident, and any additional negative news could trigger a new series of massive liquidations in today’s largest and most active global exchanges.
