Bitcoin Plunges to Two-Year Low as Fear Grips Market

Bitcoin sentiment has taken a turn for the worse as the Crypto Fear & Greed Index plummeted to a two-year low, reaching a score of 10 on February 26. This marked the lowest point since June 2022, when the collapse of major crypto players like Three Arrows Capital (3AC), Terraform Labs, and Celsius triggered a wave of market panic.

Bitcoin's recent decline below $90,000 has shaken investor confidence, with macroeconomic uncertainties, including trade tariff threats from Donald Trump, contributing to the downturn. The crypto king is currently trading at around $86,304, having fallen by close to 16% over the past 30 days. This decline is reminiscent of past market crashes, particularly in mid-2022, when the collapse of the TerraUSD stablecoin led to $60 billion being liquidated from the crypto market.

Despite the ongoing uncertainty, some analysts believe the current conditions may present an opportunity for investors. Ben Simpson, founder of Collective Shift, suggested that historical trends favor buying during periods of extreme fear and selling when the market turns greedy. He pointed out that sentiment has been dampened by unmet expectations regarding Trump's potential pro-crypto stance, as the president is still occupied with other matters.

Pav Hundal, lead analyst at Swyftx, acknowledged that the market is currently an unforgiving environment, which has been eroding investor confidence. However, he noticed that global liquidity levels have been steadily rising, which is a trend that historically preceded positive price action for Bitcoin. For now, analysts expect that the coming weeks will be crucial for the market's direction.

Investors have also rapidly withdrawn funds from crypto investment products, led by a huge $420 million outflow from BlackRock's iShares Bitcoin Trust. This was the largest single-day exit for the fund. This recent withdrawal is part of a severe seven-day streak, and almost $3 billion exited Bitcoin products overall during this period. Other leading asset managers also saw major exits from their funds, with investors withdrawing sums ranging from $10 million to $60 million.

The cumulative effect of investor pullbacks saw the crypto market cap shrink by an additional 5.6% on the day, falling to approximately $2.9 trillion. At press time, the crypto market cap was even lower at $