Extreme Fear Returns to Crypto Markets Amid Major Sell-Off
The cryptocurrency market has plunged into extreme fear territory, with the Crypto Fear and Greed Index falling to 24 on January 21, 2026. This marks a sharp reversal from last week’s greed sentiment as over $120 billion was wiped from the market’s capitalization in just 24 hours.
What Triggered the Market Downturn?
The market sell-off is attributed to escalating geopolitical tensions. Earlier this week, the Trump administration reignited trade fears by threatening tariffs against the European Union. Speaking at the Davos summit, U.S. Treasury Secretary Scott Bessent reiterated the administration’s hardline stance on using tariffs as a geopolitical weapon. This announcement further unsettled global financial markets, triggering a flight from riskier assets like cryptocurrencies.
Bitcoin (BTC) saw its price dip below the $90,000 mark, even briefly plunging below $88,000. Ethereum (ETH) similarly faced significant losses, dropping under $3,000. In total, $120 billion was erased from the crypto market’s capitalization, reflecting widespread declines across most cryptocurrencies.
Investor Sentiment Hits Rock-Bottom
The Crypto Fear and Greed Index, which evaluates market sentiment using factors like volatility, trading volume, and Google Trends data, dropped to 24—firmly in the “extreme fear” zone. This stark change contrasts with the optimism seen on January 15 when the index reached 61, reflecting “greed.”
Investor confidence appears shaken. Analyst Rex shared via X (formerly Twitter) that many crypto participants are losing faith in the market’s long-term potential. According to Rex, even seasoned investors are shifting focus to traditional assets like stocks and commodities, signaling a broader loss of confidence in cryptocurrency narratives.
Derivatives Market Reflects Heavy Losses
The downturn has heavily impacted derivatives markets. Over 182,000 traders faced liquidations in the last day, with more than $1.08 billion in total forced liquidations. Of these, long positions accounted for $989.9 million of losses, underscoring the severity of the sell-off.
Analyst Doc highlighted that although this drawdown may not be as substantial as previous downturns, it feels worse due to the negative sentiment and apathy among investors. Nonetheless, Doc remains optimistic: “Despite the pessimism, Bitcoin remains one of the most asymmetric investments, where long-term rewards outweigh the risks,” he commented.
Is Recovery on the Horizon?
The direction of the cryptocurrency market will depend largely on how macroeconomic and geopolitical conditions evolve. For now, elevated volatility and fragile sentiment are likely to persist. However, some investors see this extreme sentiment as an opportunity to accumulate assets at lower prices, believing in the eventual recovery of the market.
Product Spotlight: Ledger Nano X for Crypto Security
During uncertain market conditions, safeguarding your crypto assets is more crucial than ever. The Ledger Nano X, available from the Ledger official website, offers top-notch security for your digital assets. Its Bluetooth-enabled hardware wallet ensures your cryptocurrency stays protected, even amidst market volatility.
Stay tuned for updates as the market continues to evolve in response to prominent financial and political developments.
