The collapse of the Crypto Sentiment index has reached a point not seen since the downfall of the Terra-Luna ecosystem in mid 2022. As Bitcoin dropped to its lowest level in 15 months, around USD 60,000, during the first week of February 2026. The widely followed Crypto Fear and Greed Index has dropped to a score of 5 (in CoinMarketCap), deep into extreme fear.
What’s Driving the Historic Sentiment Crash
Several reasons are contributing to this sharp decline in crypto sentiment, none of which are attributed to individual specific events like hacking or accident, rather its a reflection of global markets where there is a powerful risk off sentiment due to broad macro level factors like a strong U.S. dollar surge; uncertainty around what will happen with the Federal Reserve’s policies with their new chair person, and a major sell-off of stocks in the tech/AI sector, creating a perfect storm of macro conditions.
These macro “situations” are causing the global liquidity to dry up as speculative capital has been pulled from all high-risk asset classes. As a result, crypto has been disproportionately impacted, as evidenced by the substantial decline in open interest in derivatives of crypto reaching 15-month lows, indicating that traders are exiting their positions en masse.
The Parallels and Implications of Extreme Fear
The current Crypto Sentiment reading of 5 is a disturbing echo of the Extreme Fear many felt after the USD 40 billion Terra collapse. The market has experienced similar psychological trauma as a result of a major loss of confidence.
With options traders paying very high premiums for downside protection (puts), it further indicates that more pain is anticipated (expectations). Hence, it is an environment that sets a self-fulfilling prophecy where fear ultimately leads to selling, which leads to more fear, making a sustained recovery impossible until there is a major macro catalyst to change the current narrative. And, since financial markets regularly move in cycles, it is still hard to believe that this could lead to a total collapse.
In terms of crypto, even if many tokens could be wiped out from markets, there’s a reasonable amount of them that support important technology developments and innovation in various sectors, for example, asset tokenization. Fear could be here, but like everything else, it will pass.
