The Fear and Greed Index drops to its lowest point of the year. How much further is the market bottom?

Since February 5th, the crypto market has experienced a rapid cooling. Bitcoin has fallen from $73,000 all the way down, touching a low near $60,000, with a 24-hour decline of nearly 18%. More concerning is that, according to data from Alternative.me, the cryptocurrency fear and greed index has dropped to 9, approaching the lowest point of the year, truly entering an “extreme fear” state. The sharp fluctuations of this index often indicate that the market is undergoing a deep emotional crisis.

Now, Bitcoin has once again fallen below the psychological threshold of $69,000—an all-too-familiar scene. Historically, each bear market bottom has been higher than the previous bull market peak, which was considered an industry rule. But in 2022, this rule was broken for the first time. The current replay seems to once again confirm that this four-year cycle is still in motion.

Indicator Flashing Red: What Exactly Is Happening in the Market

The shockwave from this round of market decline has affected the entire market. Altcoins generally declined, with Ethereum dropping from $2,200 to a low of $1,750, and Solana falling from $92 to below $68. According to CoinMarketCap data, the total market cap of cryptocurrencies has fallen from $3.21 trillion to $2.22 trillion within just one month, evaporating $1 trillion in value.

In the past 24 hours, the total crypto liquidation amount reached $2.688 billion, with long positions liquidated at $2.3 billion. Behind these numbers are countless investors forced to exit. The global markets declined in sync, with the S&P 500 down 1.23%, Nasdaq down 1.59%, spot gold plunging 4%, and silver dropping sharply by 19%.

The extreme lows of the fear and greed index reflect the true sentiment of the market right now. When this index breaks support levels, it usually plunges into extreme fear territory, and when it hits historical lows, it often signals a deep psychological rupture in the market.

History Repeating: What Happened After the Last Support Break?

In mid-June 2022, Bitcoin experienced a 220-day continuous decline before finally breaking below $20,000—an important psychological level at the peak of the 2017 bull market. At that time, the monthly decline reached 43%, creating a rare monthly retracement in years. This event meant that even investors who bought at the 2017 high and held on were now in a loss position.

Market confidence was severely shaken. The cyclical belief that “bear markets won’t break previous highs” was broken for the first time in mainstream market cycles. After the break, the market did not immediately find support; instead, selling pressure continued to surge. Bitcoin continued to decline, bottoming out around $17,600 in mid-June. During this phase, the fear and greed index also pointed to “extreme fear,” with trading volumes significantly increasing, indicating many investors were choosing to exit.

However, the story of 2022 did not end with the support break. From June’s dip below $20,000 to the collapse of the FTX exchange in November, which marked the final low of this bear market at about $15,500, the market experienced five months of bottoming oscillations. During this period, prices repeatedly attempted rebounds but failed to stabilize above $20,000, and market confidence remained extremely fragile.

The Double Assault of Crisis: Macro Headwinds and Industry Internal Risks

The price collapse is not an isolated event but a perfect storm of macroeconomic headwinds and internal industry risks.

On the macro front, the Federal Reserve has launched the most aggressive rate hike cycle in decades to combat soaring inflation. Global liquidity is rapidly tightening, putting enormous valuation pressure on all risk assets—including US stocks and Bitcoin. During a strong dollar cycle, Bitcoin and tech stocks like Nasdaq are highly positively correlated, both entering a downward trend.

Within the crypto industry, black swan events have followed one after another. From the collapse of Terra/LUNA algorithmic stablecoins in May to liquidity crises and bankruptcies of well-known institutions like Three Arrows Capital and Celsius in June, leverage within the industry has been violently cleared. Forced liquidations and liquidations by these institutions created a death spiral, providing direct selling momentum for Bitcoin’s decline. Breaking below $20,000 was a direct consequence of these internal risks converging and exploding.

The True Face of the Bottom: Psychology Over Price

The true confirmation of a bottom is often not a precise price point but a long and arduous period. When prices stop experiencing violent fluctuations, the bottom phase exhibits distinct features: trading volume continues to shrink, price volatility narrows, and a flat bottom stage emerges.

During this phase, market sentiment shifts from initial panic to complete numbness and despair. Social media no longer buzzes about get-rich-quick myths; instead, it falls silent. Even the most steadfast holders begin to doubt. The fear and greed index continues to decline during this period, and market apathy becomes a prominent psychological feature of the bottom zone.

The collapse of FTX played the role of the final stress test. When this industry giant fell, the market dipped again but did not create significantly lower lows than six months prior. This is a crucial signal: when the market resists falling on news that could be fatal, it indicates that most sellers have been cleared out, and the market has completed a thorough handover. Although confidence recovers slowly afterward, further downward space becomes very limited.

Looking at the depth of retracement from the all-time high to the bear market low: 2011 saw about a 93% retracement, 2015 about 84%, 2018 about 83%, and 2022 about 76%. The deepest declines in bear markets are gradually converging. Based on this trend, the current bear market bottom might be around a 70% retracement. This gradual convergence in data essentially reflects the evolution of the fear and greed index—each cycle’s extreme emotions tend to be relatively milder.

Using the Fear Index to Catch the Bottom: From Passive to Active

How to enter at the bottom? Blindly buying the dip has always been risky. When a key long-term support level is first broken, it usually means the start of intense panic selling, not the end. But analyst Phyrex Ni offers a systematic approach: using the VIX index to determine Bitcoin’s entry timing.

The VIX level clearly delineates different risk opportunities:

VIX < 20: Market is in normal volatility; no special action needed.

VIX 20-25: Early panic signals; not necessarily the best time to buy but worth observing, especially for assets that have fallen significantly.

VIX 25-30: Event-driven panic, such as potential halts or tariffs in 2025. This stage can be suitable for starting to build positions; often, rebounds occur after the event ends.

VIX 30-40: More extreme event phase, with significant fear-mongering. This window often offers higher success rates for buying, and the fear and greed index usually hits yearly lows.

VIX > 40: Market begins spreading bear market rhetoric; backtesting shows that investing in BTC in this range is quite stable and yields good returns later, but such high VIX levels are rare.

VIX > 50: Extremely rare, last seen during the US adjustment and tariff shocks in April 2025. Historical backtests indicate that when VIX exceeds 50, a significant upward trend often follows within a short period.

Currently, the VIX stands at 22.56, in the observation zone. At this stage, whether to buy or not is less critical; it depends on individual circumstances. The most reliable timing usually occurs when VIX exceeds 25 or 30. However, in recent years, exceeding 30 has been infrequent.

Reality vs. History: Will It Repeat This Time?

Bitcoin is currently trading at $68,840, a clear retracement from its all-time high. Ethereum is at $2,000, and Solana at $87.30. The extreme lows of the fear and greed index, combined with these price levels, seem to replay the story of 2022.

But this cycle may be different this time. Macro environment, industry maturity, and institutional participation are fundamentally different from two years ago. History does not simply repeat; it evolves in new ways. Regardless, forming a bottom takes time, requiring repeated stress tests and waiting for market numbness to set in.

When the fear and greed index points to extreme fear, true wisdom is not rushing to buy the dip but learning to wait—waiting for prices to fully bottom out, waiting for shrinking volumes and disinterest, waiting for the VIX to give clear signals, waiting for those fatal bad news to lose their killing power. Only then will the bottom truly form.