The crypto market has crashed since its all-time high in January. While Bitcoin (BTC) has fallen nearly 20%, altcoins have been hit harder, diminishing hopes of a possible altcoin season.
The sentiment is also overwhelmingly bearish because of the price performance and several detrimental events. With that in mind, the main question is: Why is the crypto market crashing, and is there any hope on the horizon?
Bearish Market Sentiment
The first sign of the bearish sentiment is the Fear And Greed index, which shows extreme fear of 21. The previous time in this range was July – September 2024, leading to a massive price decline followed by a gradual upward movement that led to an all-time high.
The lowest value reached at the time was 17 on Aug. 5, 2024. The Bybit hack of $1.5 billion in Ethereum added to the bearish sentiment and caused a short-term decline.
The crypto market also saw two liquidations of over $1 billion in leveraged positions on Feb. 3 and 25, respectively. This followed an even bigger liquidation event on Dec. 9. Most liquidations affected long positions, adding to the bearish sentiment.
The crash has not been isolated in the crypto market since stocks have also dropped, as evidenced by the 3% decline in the SP500 and the Fear And Greed index, which shows extreme fear.
Bitcoin Exchange Traded Funds (ETFs) have also seen outflows in six consecutive days, reaching their largest-ever day of exits on Feb. 25 at over $1 billion.
However, not everyone is worried. Binance co-founder CZ stated that Bitcoin won’t die and, ironically, given the crash headlines, the same will be said once Bitcoin crashes from $1,001,000 to $985,000.
Bitcoin enthusiast Tuur Demeester believes the price can increase by another 10x in the current cycle, mirroring the rally of the previous cycles. At the same time, trader Christiian uses a fractal from 2019-2020 to predict an increase to at least $160,000.
Crypto Market Cap Slides
The crypto market cap has fallen since its all-time high of $3.73 trillion in December. TOTALCAP created a double-top pattern (red icons) in January before accelerating its downward trend.
The downward movement culminated with a low of $2.76 trillion on Feb. 25, reaching the $2.80 trillion horizontal support area created by the previous cycle’s all-time high.
Even though the price trades above support, there are bearish signs developing. Firstly, the wave count shows a completed five-wave upward movement (green) that started in December 2022.
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Wave five extended and is the same length as waves one and three combined. This is a strong sign that the crypto market cap has reached its peak.
Furthermore, technical indicators are bearish. The Relative Strength Index (RSI) has generated a bearish divergence in the weekly time frame.
A similar divergence led to the beginning of the bear market in the previous cycle. Also, the weekly MACD has made a bearish cross (black circle) and is falling.
So, despite trading above long-term support, the TOTALCAP shows decisive bearish signs that suggest the bear market may have begun.
The daily time frame offers some hope for a relief rally since it shows a descending wedge created after the all-time high. Descending wedges are considered bullish patterns, meaning that they lead to breakouts most of the time.
As per the count, this could be a leading diagonal, where wave four was contained inside a short-term symmetrical triangle (dashed).
This suggests that TOTALCAP is in the fifth and final wave of the diagonal, after which a breakout is likely.
Therefore, the TOTALCAP chart mirrors the negative sentiment, suggesting that the bear market has begun.
A breakout from the descending wedge could trigger a relief rally, but the long-term trend will remain bearish.
Bearish Crypto Sentiment
Crypto sentiment has been bearish in 2025. This was especially true in February, with two massive liquidation events, record ETF outflows, and the biggest crypto hack in history.
The TOTALCAP has fallen by 25% and shows signs that the bear market has started.
However, a temporary bounce could occur once the crypto market cap breaks out from its descending wedge.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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