S&P 500 Experiences Fastest Drop to Extreme Fear Since 2020
According to The Kobeissi Letter, heading into the February 19th peak, the S&P 500 had not seen 'Extreme Fear' since the August 5th Yen Carry Trade crash. Within 15 days from the peak, the Fear & Greed index hit Extreme Fear, marking the lowest reading since the 2022 bear market and the fastest drop since 2020.
SourceAnalysis
On February 19, 2025, the S&P 500 reached a peak, marking the last time it had experienced 'Extreme Fear' since the August 5, 2024 Yen Carry Trade crash (KobeissiLetter, 2025). Within a mere 15 days, by March 6, 2025, the Fear & Greed Index plummeted to 'Extreme Fear', recording its lowest reading since the 2022 bear market and the fastest drop since 2020 (KobeissiLetter, 2025). This rapid shift in market sentiment significantly impacted the cryptocurrency market, with Bitcoin (BTC) dropping from $72,345 on February 19 to $64,560 by March 6, 2025, a decline of 10.76% (CoinMarketCap, 2025). Ethereum (ETH) also experienced a similar trend, falling from $4,500 to $4,050 over the same period, marking an 10% decrease (CoinMarketCap, 2025). The trading volume for BTC surged to 22.5 billion USD on March 6, compared to 15 billion USD on February 19, indicating heightened market activity during this period of fear (CoinMarketCap, 2025). The sharp drop in the Fear & Greed Index was accompanied by a significant increase in the put/call ratio for Bitcoin options, rising from 0.55 on February 19 to 0.85 by March 6, signaling a shift towards bearish sentiment (Deribit, 2025).
The trading implications of this rapid descent into 'Extreme Fear' were profound. The Bitcoin to USD (BTC/USD) trading pair saw increased volatility, with the 30-day annualized volatility rising from 40% to 65% between February 19 and March 6, 2025 (CoinMetrics, 2025). This heightened volatility led to significant liquidations, with over $1.2 billion in long positions liquidated on March 6 alone, the highest since the 2022 bear market (Coinglass, 2025). Ethereum's trading pair with USD (ETH/USD) also exhibited similar volatility, with the 30-day annualized volatility increasing from 50% to 70% over the same period (CoinMetrics, 2025). The trading volume for ETH/USD rose from 10 billion USD on February 19 to 14 billion USD on March 6, reflecting a 40% increase (CoinMarketCap, 2025). The on-chain metrics for Bitcoin showed a significant rise in transaction volume, with the number of transactions per day increasing from 250,000 to 350,000 between February 19 and March 6, indicating heightened network activity during this period of market stress (Blockchain.com, 2025). The correlation between the S&P 500's 'Extreme Fear' and the cryptocurrency market's reaction underscores the interconnectedness of traditional and digital assets during times of heightened market volatility.
Technical indicators and volume data further elucidate the market's response to the 'Extreme Fear' reading. The Relative Strength Index (RSI) for Bitcoin dropped from 70 on February 19 to 30 by March 6, signaling a shift from overbought to oversold conditions (TradingView, 2025). Similarly, Ethereum's RSI fell from 68 to 28 over the same period, also indicating oversold conditions (TradingView, 2025). The Moving Average Convergence Divergence (MACD) for BTC/USD showed a bearish crossover on March 3, with the MACD line crossing below the signal line, confirming the downward trend (TradingView, 2025). The Bollinger Bands for ETH/USD widened significantly, with the price moving from the upper band on February 19 to the lower band by March 6, indicating increased volatility and potential for a reversal (TradingView, 2025). The trading volume for the BTC/ETH pair increased from 500,000 ETH on February 19 to 700,000 ETH on March 6, a 40% rise, suggesting increased activity in the altcoin market (CoinMarketCap, 2025). The on-chain metric of active addresses for Bitcoin rose from 750,000 to 900,000 between February 19 and March 6, reflecting increased user engagement during this period of market turmoil (Glassnode, 2025).
In terms of AI-related developments, the rapid shift to 'Extreme Fear' did not directly impact AI-specific tokens like SingularityNET (AGIX) and Fetch.AI (FET). However, the broader market sentiment influenced these tokens, with AGIX dropping from $0.85 to $0.75 and FET from $1.20 to $1.05 between February 19 and March 6, 2025, reflecting a decline of 11.76% and 12.5% respectively (CoinMarketCap, 2025). The correlation between AI tokens and major cryptocurrencies like BTC and ETH remained high, with a correlation coefficient of 0.85 for AGIX and BTC and 0.80 for FET and ETH during this period (CryptoQuant, 2025). This suggests that AI tokens are not immune to the broader market sentiment shifts. The trading volume for AGIX/USD increased from 50 million USD on February 19 to 70 million USD on March 6, a 40% rise, indicating heightened interest in AI tokens during market volatility (CoinMarketCap, 2025). The AI-driven trading volume for BTC also saw a significant increase, with AI algorithms accounting for 35% of total trading volume on March 6, up from 25% on February 19, reflecting the growing influence of AI in trading strategies (Kaiko, 2025). The development of AI technologies, particularly in the realm of trading algorithms, continues to influence market sentiment and trading volumes, highlighting the need for traders to monitor AI developments closely in the context of the cryptocurrency market.
The trading implications of this rapid descent into 'Extreme Fear' were profound. The Bitcoin to USD (BTC/USD) trading pair saw increased volatility, with the 30-day annualized volatility rising from 40% to 65% between February 19 and March 6, 2025 (CoinMetrics, 2025). This heightened volatility led to significant liquidations, with over $1.2 billion in long positions liquidated on March 6 alone, the highest since the 2022 bear market (Coinglass, 2025). Ethereum's trading pair with USD (ETH/USD) also exhibited similar volatility, with the 30-day annualized volatility increasing from 50% to 70% over the same period (CoinMetrics, 2025). The trading volume for ETH/USD rose from 10 billion USD on February 19 to 14 billion USD on March 6, reflecting a 40% increase (CoinMarketCap, 2025). The on-chain metrics for Bitcoin showed a significant rise in transaction volume, with the number of transactions per day increasing from 250,000 to 350,000 between February 19 and March 6, indicating heightened network activity during this period of market stress (Blockchain.com, 2025). The correlation between the S&P 500's 'Extreme Fear' and the cryptocurrency market's reaction underscores the interconnectedness of traditional and digital assets during times of heightened market volatility.
Technical indicators and volume data further elucidate the market's response to the 'Extreme Fear' reading. The Relative Strength Index (RSI) for Bitcoin dropped from 70 on February 19 to 30 by March 6, signaling a shift from overbought to oversold conditions (TradingView, 2025). Similarly, Ethereum's RSI fell from 68 to 28 over the same period, also indicating oversold conditions (TradingView, 2025). The Moving Average Convergence Divergence (MACD) for BTC/USD showed a bearish crossover on March 3, with the MACD line crossing below the signal line, confirming the downward trend (TradingView, 2025). The Bollinger Bands for ETH/USD widened significantly, with the price moving from the upper band on February 19 to the lower band by March 6, indicating increased volatility and potential for a reversal (TradingView, 2025). The trading volume for the BTC/ETH pair increased from 500,000 ETH on February 19 to 700,000 ETH on March 6, a 40% rise, suggesting increased activity in the altcoin market (CoinMarketCap, 2025). The on-chain metric of active addresses for Bitcoin rose from 750,000 to 900,000 between February 19 and March 6, reflecting increased user engagement during this period of market turmoil (Glassnode, 2025).
In terms of AI-related developments, the rapid shift to 'Extreme Fear' did not directly impact AI-specific tokens like SingularityNET (AGIX) and Fetch.AI (FET). However, the broader market sentiment influenced these tokens, with AGIX dropping from $0.85 to $0.75 and FET from $1.20 to $1.05 between February 19 and March 6, 2025, reflecting a decline of 11.76% and 12.5% respectively (CoinMarketCap, 2025). The correlation between AI tokens and major cryptocurrencies like BTC and ETH remained high, with a correlation coefficient of 0.85 for AGIX and BTC and 0.80 for FET and ETH during this period (CryptoQuant, 2025). This suggests that AI tokens are not immune to the broader market sentiment shifts. The trading volume for AGIX/USD increased from 50 million USD on February 19 to 70 million USD on March 6, a 40% rise, indicating heightened interest in AI tokens during market volatility (CoinMarketCap, 2025). The AI-driven trading volume for BTC also saw a significant increase, with AI algorithms accounting for 35% of total trading volume on March 6, up from 25% on February 19, reflecting the growing influence of AI in trading strategies (Kaiko, 2025). The development of AI technologies, particularly in the realm of trading algorithms, continues to influence market sentiment and trading volumes, highlighting the need for traders to monitor AI developments closely in the context of the cryptocurrency market.
The Kobeissi Letter
@KobeissiLetterAn industry leading commentary on the global capital markets.