Crypto Fear and greed index hits 5-month low of ‘extreme fear’ – What’s up with Bitcoin?

• Bitcoin’s losses dragged crypto fear and greed index hit to a 5-month low of ‘extreme fear’
• Sell-offs were triggered by President Trump’s tariffs on Mexico and Canada. 

On 25 February, Bitcoin led the crypto market sell-off after a sharp drop to $86.8k on the charts. As expected, the bearish move soured market sentiment, with the same down to a five-month low of ‘extreme fear’ at 25. 

Source: Alternative.me

In fact, according to CryptoQuant data, 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.

What’s driving the crypto sell-off?

The risk-off sentiment saw ETH and XRP dump by 10%, but BNB recorded a limited decline of 4%.

Solana was the worst hit. It shed 12% of its value and barely held onto the $140-level at press time. Overall, $1.5 billion worth of positions ($1.38 billion longs) were liquidated in the last 24 hours, as per Coinglass data.  

Source: CoinMarketCap

Even so, most traders have been wondering what triggered the massive sell-offs. According to the crypto options trading desk QCP Capital, the market tanked after President Trump enforced tariffs on Mexico and Canada. 

Part of the firm’s daily market update on its Telegram group read, 

“Market sentiment remains under pressure following Trump’s decision to implement tariffs on Canada and Mexico and curb Chinese investment.”

The trading desk added that institutional demand from corporations like MicroStrategy could be limited going forward. Unsurprisingly, the weak demand has been evident since last December. 

According to CryptoQuant, the apparent demand for BTC turned negative for the first time since last October. Alongside low liquidity conditions, these accelerated BTC’s downside risks. 

Source: CryptoQuant

In fact, some analysts, like Arthur Hayes are projecting that the low demand could drag BTC to $70k due to reduced BTC CME basis yield. He added that large funds could sell-off BTC if the yield declines any further.

Meanwhile, BTC’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. 

Worth pointing out, however, that a daily candlestick close below the range-low and bullish order block (OB, cyan) would effectively break the 3-month-long neutral market structure. 

Source: BTC/USDT, TradingView