Bitcoin's sudden 5% drop shocks market sentiment to the bottom: Perspective
After a 5% plunge in just two hours on February 23, Bitcoin triggered a free fall in the cryptocurrency market sentiment. The Crypto Fear and Greed Index continues to decline sharply, reflecting widespread panic among investors.
Crypto Fear and Greed Index | Source: Alternative
Despite being stuck in extreme fear territory throughout February, last Monday the index dropped even further to a level of 5 — an extremely rare threshold. According to Joao Wedson, CEO and founder of data analytics platform Alphractal, the last time the market saw a similar low was in 2019.
In this context, many analysts believe Bitcoin may continue to adjust toward the network’s realized price, around $54,000. In fact, the world’s largest cryptocurrency might need a deeper correction to push investors into a state of “maximum stress” — a condition often seen before a new recovery cycle begins.
USDT Daily Dominance Chart | Source: TradingView
Prolonged downward pressure combined with extreme fear has driven capital outflows from the crypto market. This trend is clearly reflected in the USDT Dominance (USDT.D) index — a measure of USDT’s market capitalization share relative to the entire crypto market. When USDT.D rises, it usually indicates investors are retreating from risky assets to seek safer havens in stablecoins.
Stablecoin Reserves on Exchanges | Source: CryptoQuant
Notably, stablecoin reserves on exchanges increased at the end of 2025, indicating a large amount of buying power quietly waiting for a “bottom” opportunity, especially from September to November. However, in the past month, the total stablecoin supply decreased from $161.19 billion to $153.75 billion, while the USDT.D index unexpectedly rebounded.
All these signals suggest that capital continues to flow out of the cryptocurrency market and into fiat currency. Along with the extreme fear reflected in the Crypto Fear and Greed Index, the current picture shows the market is entirely tilted toward the sellers, with the “bears” in full control.
Long-term Bitcoin Holders Are Distributing
Source: Glassnode
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