Crypto Fear & Greed Index Drops to 20/100 Following $2 Billion Leverage Flush
The crypto market experienced a sharp correction within 24 hours, causing $2 billion in liquidations and pushing the Crypto Fear & Greed Index to a seven-month low of 20/100. Bitcoin hovered near $100,000, prompting mixed reactions, with industry leaders speculating on potential rebounds or further downturns. Binance's Changpeng Zhao (CZ) advocated for bullish optimism despite market fear, citing past recovery trends when the index dropped below 20/100. On-chain data revealed panic selling by short-term holders, with significant BTC moved at a loss. Challenges such as low capital inflow and liquidity lag, despite favorable macroeconomic conditions, have hindered the crypto market recovery. Analysts remain cautiously optimistic about a potential rebound influenced by supportive regulations, Quantitative Easing (QE), and global interest rate cuts.
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Severe Correction in Crypto Market
The crypto market has undergone a severe correction over the past 24 hours, resulting in approximately $2 billion in liquidations. Consequently, the CoinMarketCap Crypto Fear & Greed Index dropped to a seven-month low of roughly 20/100. This level of extreme bearish sentiment has not been seen since April 2025.
Source: CoinMarketCap
Bitcoin's Price Behavior Amid Market Panic
Despite the prevailing panic, Bitcoin (BTC) price action near the $100,000 level, testing it from above for the first time since June, has drawn contrarian commentary from industry leaders.
Related: ETH Whales Buy the Dip as Ethereum Revisits $3K: Where Are Prices Headed?
CZ's Perspective on Fear in the Crypto Market
Binance's co-founder and former CEO Changpeng Zhao (CZ) has questioned the value of the high fear of further crypto capitulation. CZ sparked support for bullish sentiment as crypto traders anticipate a rubber-band rebound in the coming weeks fueled by supportive fundamentals.
For instance, Rishabh Singhal, founder of CryptoWaley, commented that Bitcoin's price surged 50% after the fear and greed index dropped below 20/100 in April, 2025. However, Singhal also argued that the odds of a full-blown crash cannot be ruled out entirely.
Worth noting, CZ recently disclosed a purchase of Aster (ASTER), potentially signaling his bullish outlook.
Panic Selling by Short-Term Traders
Short-term traders have capitulated due to low liquidity, as shown by on-chain data analysis from CryptoQuant. After a Bitcoin whale capitulation over the past month, CryptoQuant revealed that short-term holders sent 45,700 BTC to exchanges at a loss, signaling widespread panic selling.
Source: X
Liquidity Issues and Market Sentiment
The low bullish enthusiasm has been attributed to low capital flow into the crypto market. According to Wintermute, a top-tier market player, the crypto market is yet to benefit from rising global liquidity despite the Federal Reserve's interest rate cuts.
“The market backdrop is still strong as is evidenced by the equity market performance. Liquidity is just not reaching crypto yet,” Wintermute noted.
Macro Outlook and Supportive Fundamentals
Ahead of the highly anticipated Federal Reserve’s Quantitative Easing (QE), the crypto market is expected to bottom out. Additionally, Wall Street investors have been betting on a bullish fourth quarter similar to the crypto summer of 2017.
Cumulative supportive fundamentals, including a clear crypto regulatory framework in the United States, are seen as a bullish indicator. Furthermore, the recent crypto selloff was not triggered by major negative news but rather by heavy liquidation of leveraged traders.
Related: Why Is Crypto Down? Data Shows Bitcoin Tracking US Liquidity Drain
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