The Market is Once Again in "Extreme Panic", Analyze the Turning Point of the Market

[TL；DR]:

Since March, the crypto market has experienced a sharp decline. BTC has fallen below $80,000 several times, a wave of altcoin liquidations has emerged, and the market Fear & Greed Index has fallen to a historic low, showing that investors are extremely pessimistic.

The combination of factors, such as Trump’s tariff policy and concerns about a global economic recession, has led to a deterioration in market sentiment and a wave of panic selling. At the same time, favorable policies have not met expectations, and the outflow of funds from institutional investors has exacerbated the market decline.

Historical data shows that after the market Fear & Greed Index falls to the quarterly fear range, the market often forms a staged bottom. The current panic sentiment in the crypto market is close to the historical extreme, which may indicate that the market is approaching a low point, providing opportunities for reverse layout.

Introduction

Since March, the crypto market has experienced a round of sharp declines. The price of BTC has fallen below $80,000 several times, and the altcoin sector has fallen again and again. The Fear & Greed Index has fallen to a historically low level, showing that investors are extremely pessimistic about the market outlook. In this context, the author believes that it is necessary to re-evaluate the current market trends and investment strategies, and explore the reasons for this round of deep adjustments and their implications for future market trends.

Deep Correction in March, Market Panic Index Hits Historic Low

After repeated battles at $100,000, Bitcoin finally ushered in a dramatic downward trend in March. Since Trump signed the executive order on crypto reserves on March 7, Bitcoin has fallen below $90,000 and $80,000, and as of the date of writing, it has fallen to a low of $76,600. The entire market has continued its sluggish trend, and sectors such as AI Agent, PayFi, and DeFi, which had previously performed well, have also fallen across the board.

The market decline was accompanied by a massive wave of liquidations. According to Coinglass data, on March 11, the day of the most panic, more than 290,000 people were liquidated across the network, with a total liquidation amount of up to $839 million, of which BTC liquidation amounted to $295 million and ETH liquidation amounted to $207 million.

Source: Coinglass

According to Bravos Research, the current crypto market has experienced the largest altcoin liquidation since the LUNA crash in May 2022. The market has seen a total of approximately $10 billion in liquidations, far exceeding the situation after the FTX crash. Data shows that Bitcoin dominance continues to rise, indicating that there are no obvious altcoin season signals in the short term.

Source: Bravos Research

The deterioration of market sentiment can be seen from the sharp drop in the Fear & Greed Index (FGI). This crypto index combines volatility, market volume, social media sentiment, surveys, Bitcoin dominance, and trends to reflect the emotional state of investors. According to data, the FGI has fallen below 20 several times, in the “extreme fear” range, a sharp drop from 70 (“extreme greed”) a month ago. This change clearly reflects the rapid deterioration of investor confidence, and market panic has approached a critical point.

Source: alternative.me

The index has fallen below 20 several times since March, which is quite rare. Even in mid-2024, there was no such panic. Glassnode’s net unrealized profit/loss (NUPL) indicator fell from 0.6 (high greed) to 0.2, which is also close to the level at the beginning of the historical bear market. Usually, when it is below 0, it marks the market entering the capitulation stage. It can be said that this year’s crypto market has undoubtedly entered its darkest moment.

The Deterioration of the Macro Economy and the Digestion of Favorable Factors Triggered A Deep Correction

A closer look at the current round of crypto market declines shows that it is caused by multiple factors. Market analysis often uses the Trump administration’s tariff policy as the most direct trigger for this market panic.

Trump’s successive tariffs against major trading partners such as Canada, Mexico, and China have not only directly impacted corporate profits, but also exacerbated global trade tensions. Investors are increasingly worried about the escalation of the trade war and a global recession, and this negative sentiment has quickly spread to financial markets, triggering a wave of panic selling.

The plunge in the U.S. stock market, as an important indicator of the global economy, has undoubtedly exacerbated the panic in the market. On March 10, 2025, the U.S. stock market suffered a “Black Monday,” with the Dow Jones Industrial Average falling 2.08%, the Nasdaq falling 4%, and the S&P 500 falling 2.7%. Large technology stocks fell across the board, and Tesla fell more than 15%.

Source: Haver Analytics

In addition to the Trump administration’s tariff policy, concerns about a global recession are also one of the important reasons for the market’s decline. As the global economic situation deteriorates, investors’ concerns about a future recession are deepening.

Of course, market sentiment and psychological factors played a role in the market decline. Trump’s executive order announced that the government would not purchase additional Bitcoin, and the White House crypto summit last Friday did not introduce any concrete favorable policies. The market turned from expectation to disappointment, and then the price fell all the way.

Source: SoSo Value

Regarding institutional investor behavior, crypto investment products have seen net capital outflows for the fourth consecutive week, with $867 million outflows last week and a total outflow of $4.75 billion in four weeks. Bitcoin spot ETFs have seen net outflows of more than $5 billion since February, which shows that the growth in Bitcoin spot demand is shrinking and short positions in the futures market have taken the lead.

From A Historical Perspective, the Rise and Fall of FGI

In fact, there is a close correlation between the market Fear & Greed Index mentioned above and the price of Bitcoin.

Source: Coinglass

According to historical data, whenever the FGI index falls below 20 (“extreme panic”), the market tends to form a stage bottom within 1-3 months.

March 2020: Bitcoin hit a low of around $3,800 on March 12 as the coronavirus outbreak triggered a global financial market crash, with the index falling to around 10 at the time, but Bitcoin subsequently rebounded to over $10,000 within a few months and reached an all-time high of around $69,000 in 2021.

December 2018: The market was at the end of the bear market at that time. Bitcoin hit a low of about $3,200 in December. The index fell to about 15 and market sentiment was extremely pessimistic, but the price subsequently bottomed out and entered a recovery period, rebounding to $14,000 in the first half of 2019.

June 2022: In the middle of the bear market, the Terra/Luna crash triggered a downward spiral in the market, when the index fell to 8 (an extremely low level) and the price of Bitcoin fell to about $17,600, but gradually recovered to over $30,000 by 2023.

August 2024: Bitcoin fell below $50,000 in early August 2024, and the FGI index fell below 20, but then Bitcoin gradually climbed to $100,000 and triggered a wave of altcoin seasons.

Of course, the extreme values ​​of the index may vary in different market cycles:

Bear market: The index may stay in the “extreme panic” range for a long time and fall to lower levels (such as below 10), corresponding to deeper bottoms. For example, March 2020 and June 2022.

Bull market: The index low may only fall to 20-30, but it is still a relative buying opportunity. For example, in July 2021, the index fell to 20, and the price of Bitcoin bottomed at $29,000 and then rose to $69,000.

Therefore, based on historical data and current market conditions, the extreme values ​​of the market Fear & Greed Index are often closely related to market turning points. The current panic sentiment in the crypto market is close to the historical extreme, and the price of Bitcoin has dropped to as low as $77,400, which may indicate that the market is approaching a staged low, which is often a golden window for reverse layout.

Source: Gate Research

But for short-term investors, the above indicators are for reference only, and specific investments still need to be vigilant about the competition between sentiment repair and capital outflow. For long-term investors, the current pullback seems to be consistent with the volatility of the past bull market. As Bitwise’s recent report said, “If you are a long-term investor, the only important question in Bitcoin is: Will Bitcoin become a global macro asset with geopolitical importance like gold?”