A recap of what’s behind the crypto market panic

A recap of what’s behind the crypto market panic

The current extreme fear streak is already the longest ever in crypto history, and counting. Here is a summary of the main events responsible for this down sentiment.

Crypto Fear and Greed Index Still Pointing to “Extreme Fear”

index of fear and greed” is an indicator that tells us about the general market sentiment among crypto investors.

The metric uses a numerical scale ranging from zero to one hundred to represent this feeling. Any values ​​below the fifty mark imply a fearful market, while those above the threshold mean that investors are currently greedy.

Extreme values ​​above 75 and below 25 indicate extreme feelings of “extreme greed” and “extreme fear,” respectively.

Now, here’s a chart from the latest weekly report from Arcane Researchwhich shows the trend of the crypto fear and greed index over the past year:

Looks like the value of the indicator has been very low in recent weeks | Source: Arcane Research's The Weekly Update - Week 25, 2022

As you can see in the chart above, the current value of the Crypto Fear and Greed Index is 10, which suggests that the market is extremely scary at the moment.

This streak of extreme fear has been going on for more than two months now, and it’s the longest streak ever in the history of the metric.

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Even before this latest extreme scare, market sentiment wasn’t particularly good for the rest of 2022. However, it still wasn’t as low as the current streak.

So what’s behind this historically low sentiment? There are a number of market conditions that have led to this and continue to perpetuate it.

The first event to note is UST collapse in May. A major stablecoin like Tether USD losing its tether has brought fear and uncertainty to many investors in the market.

Another is the macro uncertainty looming in the market, such as the possibility of a Fed rate hike and tightening regulations by various governments around the world.

Related Reading | Bitcoin’s “reserve risk” metric is approaching all-time lows

These above mentioned factors turned into the lowest mood and led to bigger consequences on the entire crypto market in the form of a crash.

A byproduct of the latest crash was the collapse of Three Arrows Capital (3AC), a cryptocurrency hedge fund. The other was the lender’s company Celsius stopping withdrawals and potentially going bankrupt.

Such negative news prevents the fear and greed index from recovering from these historic lows. Like a vicious cycle, bad news leads to more bad news and further fuels extreme fear.

BTC price

At the time of writing, the price of Bitcoin is hovering around $20k, down 1% over the past week.

A recap of what’s behind the crypto market panic

BTC plunges down | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Arcane Research

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