Crypto market sentiment has taken a dramatic turn in light of events taking place in the space. The Fear & Greed Index which tracks sentiment across a number of metrics and puts the data into four categories has shown that investor sentiment has taken another nosedive. This time, plunging the market back into the extreme fear territory, signaling the return of market sell-offs.

Investors Are Losing Faith

After spending a long stretch of time in the greed territory last year, the Fear & Greed Index had moved back into the fear territory following major crashes towards the end of the year. It had hit a low of 11 on the chart at the beginning of 2022 as the market spent the majority of the month in the extreme fear territory. A small reversal in the market had pulled it out into neutral but this would only last for a short time.

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The crypto market has now gone back into extreme fear after touching back into greed for the first time in fall months. This coincided with the recovery of bitcoin above $40K, taking most of the market with it. However, with geopolitical and macro uncertainty still a big issue, it has affected the sentiment in the broader financial markets and this has spilled over into crypto.

Crypto Fear & Greed Index | Source: Arcane Research

The index opened Wednesday in the extreme fear area with a low score of 25. Sentiment for the new year has remained mostly low, and with expectations of a ‘crypto winter’ spreading widely, sentiment may continue to plummet. Indicators point to more downtrends in the coming weeks. This coupled with growing social and financial troubles, investors are being more careful than ever.

Crypto Market Sees $400 Billion Shaved Off

In the first two months of 2022 alone, the crypto market has seen some tumultuous times. Heading into the new year with more than $2 trillion in total market cap, it has since seen a massive decline that has caused over $400 billion to be shaved off its market cap.

Total market cap down to $1.7 trillion | Source: Crypto Total Market Cap on TradingView.com

These crashes and dips have been followed by sentiment turning into the negative and top assets in the space have lost 50% or more of their all-time high value. The crypt market is now sitting at $1.78 trillion, down almost $200 billion from last week when another crash caused it to lose more value.

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Low momentum continues to be the order of the day among multiple assets. And with investors skeptical about putting money into the market, recovery is not on the horizon at this point and the total market cap may remain low.

Featured image from Northstar Church, charts from Arcane Research and TradingView.com