Bitcoin Plunge Sparks 'Extreme Fear' in Crypto Market

Bitcoin's recent decline has dragged the crypto fear and greed index to a 5-month low of 'extreme fear,' sparking concerns among investors. The sell-off, which began on February 25, saw Bitcoin drop to $86.8k, triggering a bearish sentiment that pushed the index to 25, its lowest level since September 2021.

The sell-off was not limited to Bitcoin; other cryptocurrencies, such as Ethereum (ETH) and XRP, also experienced significant losses. ETH and XRP dumped by 10%, while Binance Coin (BNB) recorded a limited decline of 4%. Solana was the worst hit, shedding 12% of its value and barely holding onto the $140-level at press time. Overall, $1.5 billion worth of positions, including $1.38 billion longs, were liquidated in the last 24 hours.

The crypto market's decline can be attributed to several factors. According to QCP Capital, a crypto options trading desk, the market tanked after President Trump enforced tariffs on Mexico and Canada. Additionally, institutional demand from corporations like MicroStrategy has been weak since last December, further exacerbating the market's downside risks.

CryptoQuant data shows that 37.4k BTC, worth over $3.3 billion, were sent to exchanges at a loss as short-term holders feared that the plunge could extend itself. The apparent demand for BTC turned negative for the first time since last October, accelerating BTC's downside risks. Some analysts, like Arthur Hayes, are projecting that the low demand could drag BTC to $70k due to reduced BTC CME basis yield.

Bitcoin's recent low of $86k marked a 20% drawdown from its record high of $109.5k. However, the range had not yet been invalidated at the time of writing. A daily candlestick close below the range-low and bullish order block (OB, cyan) would effectively break the 3-month-long neutral market structure, potentially signaling a more significant market downturn.