Investors in the crypto market trading in the US financial landscape are showing signs of panic, as seen in the mainstream Fear & Greed Index.
This index fell as low as 18 points, its lowest since August 2024. Such a state is usually connected with substantial sell-offs and declining investor confidence in the crypto and stock markets.
The Current F&G Index and VI Outlook
As highlighted by The Kobeissi Letter, the Fear & Greed index is now well below the 30-point threshold, which is considered “extreme fear.”
Additionally, this is the second-lowest it has recorded since the bear market bottom in 2022.
The Fear & Greed Market Index measures the overall sentiment of market participants and other sources.
The index examines the amount, or volume, of shares on the NYSE that are rising compared to the number of falling shares.
In the past, a decline in the Fear & Greed Index is usually a good indicator for the market. This is so because a bounce comes immediately after for Bitcoin and other cryptocurrencies.
For instance, in the crypto market, Bitcoin immediately recovered when the indicator hit 10 in March 2020. Following this trend, analysts expect Bitcoin to reclaim its all-time high soon.
In the meantime, the Volatility Index, VIX, has increased by 38% over the past week.
The VI index created by CBOE Global Markets shows the market’s expectation of 30-day volatility.
Historically, a VIX value below 20 is considered a period of stability in the market, while levels of 30 or more indicate high volatility.
Notably, the VIX index has a strong correlation with stock market returns. If the VIX moves up, the S&P 500 will likely fall in price.
On the other hand, the S&P 500 is expected to experience stability If the volatility index declines.
Stock and Crypto Market Outlook
The Fear & Greed Index, when combined with fundamentals and other analytical tools, can help investors assess the market sentiment.
It can alert investors to the emotions and biases influencing their decisions in the stock and crypto markets.
Currently, negative sentiments are pronounced in both the stock and crypto markets.
Surprisingly, the S&P 500 SPX is merely down by roughly 3% from its record finish, set on February 19. However, the technology-heavy Nasdaq is down around 5% in February due mainly to a 4.6% drop this week.
Meanwhile, the crypto market continues to show a downtrend, with the total market cap dropping by 1.17% in the last 24 hours.
Analysts say Bitcoin (BTC) is caught up in the momentum of falling prices.
The leading digital asset has plunged toward the $83,000 level, largely influenced by the combination of Trump’s tariffs and a $1.44 billion hack on crypto exchange Bybit.
Bitcoin Reversal and Growth Catalyst
Following a substantial sell-off, Bitcoin price dropped to the $84,400 support level.
This level represents a critical make-or-break point for Bitcoin’s long-term movement.
Given the strength of historical support zones and prevailing market sentiment, an upside reversal appears to be the likely scenario.
However, Bitcoin’s failure to hold above this level could signal a deeper bearish shift with long-term consequences.
On the upside, increasing institutional interest in Bitcoin would continue to support long-term price appreciation.
Also, rising inflation and economic uncertainty in the US support Bitcoin’s appeal as a hedge asset.
