Encryption market panic spreads: When numbers become heartbeats, how do investors face the "extreme fear" abyss?

On February 27, 2025, the Cryptocurrency market was like a forest shrouded in dark clouds, with the panic index plummeting from 21 to 10 within just 24 hours, hitting the historical low since June 2022. Just the day before, the market was immersed in the symbol of extreme fear, the number “21” - a low point not seen since August 2024. Behind the cold numbers are the accelerated heartbeats and trembling fingers of countless investors, the harrowing moment when the BTC price retreated all the way from the brief support line of $52,000, and the market sentiment underwent a dramatic reversal from greed to fear. In this storm, what exactly is happening in the Cryptocurrency market? How should investors navigate in the fog of fear?

One, Panic Index: The ‘ECG’ of the Market and Its Lethal Warning

The fear and greed index of Crypto Assets is like a real-time updated market electrocardiogram. Every beat of it affects the nerves of millions of investors worldwide. This index, woven together by volatility (25%), trading volume (25%), social media buzz (15%), market surveys (15%), BTC market cap dominance (10%), and Google trends (10%), froze at 21 on February 26, 2025, only to plummet to 10 the next day, declaring that the market has shifted from “extreme fear” to “deep panic level”.

In August 2024, when the panic index first touched 23, the market briefly fell into chaos. Now, as the index further probes to 10, it means the market’s pulse is weakly beating - BTC price plummeted more than 10% in 24 hours, Ethereum once breached the psychological barrier of $2000, 270,000 investors were wiped out in liquidation, and $1 billion in wealth vanished like smoke. These numbers are no longer codes on the screen, but the ashes of countless people’s half-lifetime savings.

From greed to fear: an emotional ‘avalanche’

Just a month ago, on February 2, the greed index was still at 60, and the market was filled with optimistic expectations for the bull market. However, the greedy bubble was gently punctured by a needle: the U.S. stock market plummeted, institutions sold off, geopolitical conflicts… Multiple negative factors piled up like an avalanche, pushing market sentiment from the mountaintop to the valley bottom.

A scene from August 5, 2024, seemed to repeat itself as if it were yesterday: BTC plummeted by 20% in a single day, with the correlation coefficient to the Nasdaq index soaring to 0.46. As Wall Street’s tech giant NVIDIA evaporated 26% of its market value in a day, and Berkshire Hathaway crazily sold Apple stocks to hoard cash, the encryption market was like a ship swept away by the storm in the US stock market, experiencing severe turbulence in the ebb of liquidity. This strange cycle of ‘falling without rising’ exposes the fragile nature of Cryptocurrency as a risky asset.

Market maker Jump Trading has been exposed to selling $4.1 billion worth of Ethereum, like a giant stone thrown into the lake - the ripples quickly spread into huge waves. The institution’s massive exodus not only triggered a price collapse but also set off a chain of liquidations on the on-chain lending platforms: within 24 hours, $320 million in collateral in the DeFi market was forcibly liquidated, and ordinary investors became ‘cannon fodder’ in the algorithm-driven stampede.

The Root of Fear: When the Specter of Economic Recession Descends

Market panic is never groundless. Hidden behind the numbers is the specter of a global economic recession quietly approaching.

In July 2024, the US unemployment rate surged to 4.3%, triggering economist Claudia Sahm’s recession warning model - an indicator that has only missed once since 1953. When the three-month average unemployment rate is 0.5% higher than the 12-month low, the probability of an economic recession has exceeded 90%. These numbers act as a death knell, forcing investors to frantically sell risk assets and turn to safe havens such as US bonds.

Although the market expects the Fed to start cutting interest rates in September 2024, this rate cut is not a life-saving straw, but has become the last straw that crushes the market. Because this is not a “defensive rate cut” taken to stimulate the economy, but a “surrender rate cut” when the economy has already entered a recession. When the rate cut changes from being bullish to bearish, the market’s sharp decline becomes a bloody footnote to the economic pessimism.

Four, Surviving in Fear: Investors’ “Dark Forest Law”

In the face of an extremely fearful market, investors need not only data analysis, but also a set of survival philosophy.

First Law: Identify the ‘Panic Trap’ Historical data shows that when the fear index is below 25, the market is often oversold. In September 2024, the fear index dropped to 23, and BTC rebounded by 18% within a month. The difference this time is that the deterioration of the economic fundamentals makes the technical rebound full of traps - 10x Research warns that if BTC breaks below the $55,000 support, it may plummet to the $42,000 abyss.

The second rule: Embrace ‘counter-human operations’ When social media is overwhelmed by panic speech and exchanges are constantly sounding the alarm of liquidation, it is the moment for contrarian thinkers to hunt. In June 2022, when the panic index dropped to 10, BTC started a 300% surge six months later. But such opportunities always belong to those who can use rationality to restrain fear.

The third rule: reconstructing investment logic Incorporate the correlation between Crypto Assets and US stocks (now at 0.46) into the analysis framework, pay attention to the Federal Reserve interest rate decision and non-farm data, and monitor the on-chain trends of institutions such as Jump Trading - the new era of encryption investment has evolved from “grassroots game” to “the art of macro hedging”.

Is the end of fear rebirth?

At this moment, the encryption market is at a crossroads. On one side is the darkest moment reflected by a panic index of 10, on the other side is the dawn hinted by the historical cycle law. While Buffett holds $276.9 billion in cash and watches, while ordinary investors tremble in liquidation messages, the real winners may be quietly calculating: is this panic the end of destruction, or the beginning of wealth redistribution?

The answer lies in the struggle of every investor against the weakness of human nature. After all, the history of the encryption market has never been gentle - it only rewards those who can still hear the footsteps of opportunity in fear.