'Extreme fear': Crypto Fear & Greed Index hits multi-year low, as bitcoin sinks below $86,000

Investor sentiment has taken a hit in recent days, with The Crypto Fear & Greed Index compiled by Alternative.me plunging further towards "extreme fear" with a score of 10 as of Thursday as the crypto price plunge extended into a third day.

This is the Index’s weakest reading since June 2022, when the market was shaken by the collapse of Three Arrows Capital, the implosion of Terra's LUNA and UST tokens and Celsius halting user withdrawals.

The Index measures cryptocurrency market sentiment on a scale from 0 (extreme fear) to 100 (extreme greed), encompassing factors such as volatility, market momentum, trading volume, social media sentiment, bitcoin dominance and trends. A low index value can indicate a buying opportunity, while a high value suggests a potential market correction.

"U.S. President Donald Trump’s announcement of a potential 25% tariff on European goods has reignited investor fears, sending the Crypto Fear & Greed Index down to 10, in extreme fear territory," BRN analyst Valentin Fournier noted.

Market sentiment sours amid economic uncertainty

According to WeFi Head of Growth Agne Linge, the extreme fear gripping investors is justified in the short term as expectations for a pro-crypto U.S. government have yet to materialize into growth stability.

"While we’re seeing shifts in crypto enforcement policies, ongoing regional tariff wars and weak consumer sentiment have dampened investor confidence," said Linge.

Tariffs on Canada and Mexico, set to take effect on March 5, are also weighing on markets.

"The stock market’s reaction to potential economic fallout is prompting investors to rotate capital away from risky assets," Linge noted. "Bitcoin, given its natural volatility, doesn’t offer the short-term stability needed amid this uncertainty."

Nexo Head of Communications Eleonor Genova cited Prospect theory as a way to help explain why fear grips markets so tightly. "Investors are risk-averse when securing gains but risk-seeking when facing losses," Genova told The Block. "This means that in bull markets, they lock in small, certain profits rather than risking them for higher but uncertain returns." However, Genova added that in downturns, investors hold onto losing positions, hoping for a recovery—even when probabilities suggest otherwise.

The sentiment plunge comes just over a month after the Index set a yearly high of 84 after pro-crypto President Trump's inauguration, coinciding with bitcoin's all-time high of more than $109,000. However, bitcoin has since fallen 22% from those levels, compounded by an 11% decline this week alone. Major altcoins have fared worse, with ether down 17% and SOL 18% over the past few days. Meanwhile, the GMCI 30 Index, representing a selection of the top 30 cryptocurrencies, is down around 13% this week to 148.82.

Back in Terra collapse territory

The last time the Fear & Greed Index was at such levels was in June 2022, as the bear market was getting underway in earnest amid the collapse of the Terra ecosystem, hedge fund Three Arrows Capital and the centralized crypto lender Celsius.

While the fraud later uncovered at the now-defunct crypto exchange FTX later that year marked the bear market bottom as it filed for bankruptcy protection in November 2022, the index did not drop any lower, failing to fall below 20 until last September.

Commenting on the Index's collapse on Wednesday, GMI Head of Macro Research Julien Bittel highlighted that the last time it breached that level in September, bitcoin subsequently surged over 100%.

"While some fear the start of a bear market, history suggests that 25% pullbacks are common in bull cycles," Fournier said. "U.S. efforts to establish a National Crypto Reserve remain a major long-term catalyst. We maintain our bullish stance and expect a market rebound before the end of the week. We continue to overweight Solana and remain neutral on BTC and ETH."