The rise of fear and greed in cryptocurrencies hits a 5-month low – what’s happening with Bitcoin?
Bitcoin led a significant drop in the cryptocurrency market on February 25th, with prices plummeting to $86.8k. This bearish movement caused market sentiment to turn sour, reaching a level of ‘extreme fear’ not seen in five months, hitting 25 on the charts.
Data from CryptoQuant shows that 37.4k BTC, valued at over $3.3 billion, were transferred to exchanges at a loss as short-term holders panicked about the potential for further declines.
What is causing the decline in the crypto market?
The overall risk-off sentiment resulted in ETH and XRP dropping by 10%, while BNB experienced a modest 4% decrease. Solana suffered the most significant losses, shedding 12% of its value and struggling to maintain the $140 level. Coinglass data reveals that $1.5 billion worth of positions (with $1.38 billion in long positions) were liquidated in the past 24 hours.
Traders have been curious about the reasons for the substantial sell-offs. QCP Capital, a crypto options trading desk, suggested that the market downturn was triggered by President Trump’s decision to impose tariffs on Mexico and Canada. A snippet from the firm’s daily market update on its Telegram group stated:
“Market sentiment has been affected by Trump’s tariffs on Canada and Mexico, along with restrictions on Chinese investment.”
QCP Capital also pointed to a potential decrease in institutional demand from companies like MicroStrategy, which has been noticeable since December. CryptoQuant data indicates that BTC’s apparent demand turned negative for the first time since October, increasing the downside risks amid low liquidity conditions.
Analysts like Arthur Hayes are forecasting that reduced BTC CME yield could lead to a drop in demand, potentially dragging BTC to $70k. Hayes suggested that if the yield continues to decline, large funds may start selling off BTC. While Bitcoin’s recent low of $86k represented a 20% decrease from its all-time high of $109.5k, the overall trading range remained intact at the time of this report.
It’s worth noting that a daily close below the range-low and bullish order block (OB, cyan) could break the neutral market structure that has been maintained for the past three months.