On February 6, during a critical pre-market trading window for U.S. stocks, the cryptocurrency market experienced a deep sell-off, with Bitcoin officially falling below the key psychological level of $70,000. The current market dynamic is driven by extreme risk aversion, as the Fear and Greed Index plunged to an alarming reading of 11—a level historically seen only a handful of times—signaling that the digital asset sector is undergoing a sharp deleveraging cycle. Although Bitcoin reached record highs last year, recent consecutive declines have pushed market sentiment into deep pessimism.
This atmosphere of "extreme fear" is not confined to crypto assets; precious metals have also shown significant volatility. Recent data indicates that both gold and silver posted notable declines, with gold falling below $4,900 per ounce and silver dropping over 11% in a single day, slipping under $79 per ounce. This trend reflects capital outflows from both traditional safe-haven assets and digital reserve assets amid macroeconomic uncertainty. In contrast, major U.S. stock indices demonstrated notable resilience, with the QQQ ETF tied to the Nasdaq 100 rising 0.22% in pre-market trading. This divergence in performance across asset classes adds complexity to global portfolio management.
Publicly traded companies with significant Bitcoin exposure are under considerable pressure. Data shows that MicroStrategy (MSTR) has fallen nearly 80% from its peak in November 2024, while other firms holding Bitcoin as treasury assets, such as Strive and Nakamoto, have also declined by approximately 6%. Similarly, shares of cryptocurrency exchange Coinbase Global, Inc. and several AI mining companies have generally underperformed, reflecting cautious investor sentiment toward the entire ecosystem.
Despite the prevailing pessimism, some potential recovery signals are emerging. The unexpected strength of the iShares Expanded Tech-Software ETF (IGV) may offer underlying support to the crypto market, given Bitcoin's historically high correlation with the tech sector. However, even tech giant Google saw its stock decline despite surpassing profit expectations, after announcing plans to increase capital expenditures to $185 billion—highlighting investor concerns over future profit margins.
In the current complex financial environment, investors are advised to maintain high vigilance and exercise professional judgment. When the Fear Index reaches an extreme level of 11, markets often enter a phase of irrational selling, though the risks of bottom-fishing remain substantial. Investors should closely monitor technical recovery signals, particularly stabilization around key support levels, and consider prudent asset allocation to hedge against cross-market volatility.
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