- Bitcoin fell below $80,000 on Monday, representing a 27% drop from its all-time high.
- The combined losses in the crypto and stock markets have exceeded $6 trillion over the last two months.
- These increased losses come as investor sentiment shifts from extreme greed, with the Fear and Greed Index plummeting to 14.
On Monday, Bitcoin fell to $78,000, indicating a 27% decrease from its peak, as both crypto and stock markets collectively lost $6 trillion in market cap. This selling pressure is largely influenced by a growing correlation between the two asset classes and a notable shift in investor sentiment towards a risk-averse approach.
Crypto and stocks decline as investor sentiment hits all-time lows
The cryptocurrency market experienced significant losses on Monday, dropping by 4% and reducing its market cap to $2.67 trillion — a level not observed since November 9. Over the past three months, intensified selling has resulted in a $1.2 trillion loss in market cap for crypto assets since their peak on December 17.
Bitcoin hit a multi-month low of $78,000 for the first time since November, representing a 27% decline from its all-time high of $107,000 in January.
Similarly, the stock market suffered, with over $1.4 trillion erased from the S&P 500 on Monday, marking its largest single-day loss since 2022. Combined, the crypto and stock markets have lost nearly $6 trillion in market cap since January.
The downturn in both crypto and stock markets reflects investors’ significant withdrawal from riskier assets. This is underscored by the Fear and Greed Index, which has plummeted to a two-year low of 14, signaling a pronounced risk-off sentiment.
Investor sentiment was characterized by extreme greed following Trump’s election victory last year when the index peaked at 92. The current shift to fear suggests a broad disinterest in risk assets.
“The primary driver behind the market’s downturn is a sudden change in risk appetite. We’ve transitioned from Extreme Greed to Extreme Fear in just a few days,” The Kobeissi Letters stated in a post on X on Monday.
“Market positioning was so polarized that we’ve swung to the complete opposite extreme,” they noted.
The widespread losses in both crypto and stocks highlight an increasing correlation in recent months.
For the crypto market, participants have responded more to President Trump’s tariff initiatives than to his favorable regulatory reforms regarding the digital asset sector. For instance, the recent establishment of a Bitcoin strategic reserve ended in a “sell the news” scenario, failing to relieve the bearish trends affecting the broader stock market.
“Until the crypto market adopts a new narrative, we can expect continued correlation,” analysts at QCP stated in a note to investors on Monday.
Nevertheless, Stabolut CEO Eneko Knorr emphasized that the leading digital asset may soon chart its own path.
“Bitcoin will still respond to macroeconomic trends, but once traditional markets enter a sustained bear phase, Bitcoin is likely to diverge and follow its own trajectory,” Knorr told FXStreet.
He added that while Bitcoin’s correlation with stocks influences its short-term movements, its long-term momentum “tells a different story.”
