Crypto Dipt: Bitcoin's Extreme Fear Explained

Crypto Dips in Extreme Fear as Bitcoin Falls

4 November 2025 at 16: 06

Reading time: 3 minutes

Crypto sentiment has undergone a dramatic decline and is now in a state of "Extreme Fear." It's a question on many minds: what does this mean for the near future? For well-informed investors and analysts, understanding the dynamics of this market is crucial.

The Crypto Fear & Greed Index currently has a score of around 21, which is a significant decrease from recent "Greed" levels over the past month and neutral scores just a few days ago. For those unfamiliar with this index, it measures six key signals daily, including: volatility, trading volume, social media, surveys, dominance and trends within the crypto world.

Currently, the index is showing some worrying indicators: volatility has increased, trading volume and momentum indicators have collapsed, social indicators are pointing to a downward trend, and Bitcoin dominance is increasing. This latter point to a flow of money from altcoins (alternative cryptocurrencies) to Bitcoin, which is considered relatively safe in these turbulent times. Moreover, trend data indicates increased interest in questions such as "bitcoin price manipulation." It's worth noting that a whopping ~$40 billion worth of Bitcoin was traded by long-term holders in October, underscoring the selling pressure.

The current market mood may be a warning to many investors to exercise caution. But as the saying goes, extreme fear can sometimes also be an opportunity. One notable observation in the crypto community is that extreme fear can signal a future buying opportunity. Currently, many strategic players prefer not to invest, which can lead to reduced liquidity and risk-averse behavior.

It risks becoming a vicious cycle: if investors withdraw during periods of extreme fear, this can result in delays in the inflow of fresh capital, even when new products like exchange-traded funds (ETFs) or improved infrastructures come to market. This can lead to liquidity stress, with risks of forced selling and margin calls—a more general problem we've seen recently, particularly on October 10th.

What does this mean for the short term? History shows us that when the Fear & Greed Index is deep in fear territory, it can often signal an impending rise—provided other factors are also at play. This can be the so-called "buy the fear" indication. It's essential to keep a close eye on these signals.

A key indicator to consider is the movement of long-term holders, who recently brought approximately $40 billion worth of Bitcoin into the market. This occurred while buying pressure from ETFs and other institutional investments amounted to only approximately $4 billion. The fact that Bitcoin remained around $107.000 despite this selling pressure is a promising indicator. Once these holders complete their sales or pause for a while, Bitcoin could once again establish a solid foundation for further gains.

Remember, if Bitcoin manages to close above $120.000 again, it could break this four-year cycle and pave the way for further upward movements in 2026. For now, however, it's wise to prepare for a prolonged period of fearful sentiment. But as we know, there's always a turning point…

Frequently Asked Questions

What does the drop in the Fear & Greed Index mean for investors?
The decline could indicate that investors are cautious, which could lead to buying opportunities as the market recovers.

How does liquidity impact the crypto market in times of extreme fear?
In times of extreme fear, investors may remain on the sidelines, reducing liquidity and increasing the risk of forced selling.

What are the signs for a possible Bitcoin price increase in the near future?
A stabilization in sales by long-term holders and renewed interest in buying could point to an impending price increase for Bitcoin.

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