Market Overview: Crypto and Stocks Reflect Extreme Fear

The crypto market and traditional equities have both entered an extreme fear phase, as reflected in the Fear and Greed Index, signaling deep investor anxiety. The pressing question on everyone’s mind is whether this marks the end of the bull cycle or just a temporary correction.

On Wednesday, February 26, U.S. stock markets showed mixed performance, with the Nasdaq recovering slightly while the Dow Jones declined and the S&P 500 traded flat. Futures markets edged higher, offering a small relief rally. Meanwhile, gold dropped to $2,902 per ounce and oil settled at $68.8 per barrel, showing minor fluctuations.

Bitcoin plummeted to $82,300, triggering widespread panic selling, before recovering to $85,000. While altcoins also declined, larger-cap assets remained relatively resilient. The total crypto market capitalization fell to $2.93 trillion, marking one of the biggest retracements of the cycle.

As Bitcoin's price dropped, the percentage of BTC holders in profit fell to 77%, a significant decline that amplified fear-driven sentiment.

Spot Bitcoin ETFs recorded another round of outflows, with $754 million exiting on February 26, marking the sixth consecutive day of net withdrawals. Ethereum ETFs also suffered, with $94.3 million in net outflows, reinforcing institutional risk-off behavior.

Investor Sentiment: Fear and Doubt

For many retail investors, Bitcoin’s sharp correction has triggered deep uncertainty. While BTC remains at historically high levels, the concern now is whether entering the market at this stage still presents an opportunity or if the best days of the cycle are behind us.

Reflecting on past experiences, long-term Bitcoin investors understand how emotions dictate market behavior. Having entered the market in 2017, experienced investors like  recall failing to take profits during Bitcoin’s previous all-time highs. However, steadily accumulating BTC over the years has led to strong returns, reinforcing the importance of long-term conviction.

For those worried about “timing the market,” history has proven that there is no such thing as "too late" when investing in assets with long-term potential. The key lies in understanding the asset, having a clear investment strategy, and maintaining risk management.

Why Are Bitcoin and Stocks Dropping?

Both traditional markets and crypto experienced heavy selling, leading to a heightened fear environment. While Bitcoin's price decline remains relatively moderate, the emotional shift among investors has been drastic.

Over the past three months, the crypto market has not experienced this level of extreme fear. The last time market sentiment reached similar levels was during the summer of 2022, at the peak of the last crypto winter.

The primary reason behind the recent downturn stems from new U.S. trade policies. President Donald Trump announced a 25% tariff on the European Union (EU), stating that the EU was designed to take advantage of the U.S.. This aggressive stance toward trade sparked uncertainty across financial markets.

A slightly more optimistic announcement from Trump was that tariffs on Canada and Mexico would not take effect until April 2, allowing room for negotiation to avoid a full-scale trade war.

Adding to investor concerns, Bank of America CEO Brian Moynihan provided a bleak forecast for the Federal Reserve (Fed), predicting that interest rates would remain unchanged throughout 2024 and 2025. However, this bearish economic outlook was not the immediate trigger for the market sell-off. Instead, markets began declining immediately after Trump’s EU tariff announcement.

Despite these negative macroeconomic developments, China’s economic outlook is improving. The Chinese government is expected to acknowledge a sharp decline in domestic demand next week, along with unveiling a long-awaited fiscal stimulus package aimed at stabilizing growth.

Beijing is also expected to announce increased military spending and technology development initiatives, signaling strong state intervention to maintain economic stability.

Over the past two years, China has implemented multiple stimulus measures and eased monetary policy, but these efforts stalled following Trump’s re-election victory, causing the Chinese yuan to weaken against the U.S. dollar. Given the current conditions, China is likely to resume aggressive monetary easing to boost domestic demand.

Bitcoin as a Tool to Reduce U.S. National Debt

As part of Trump’s economic strategy, the administration has ordered massive federal budget cuts by March 13, with the goal of eliminating unnecessary positions and reducing government waste.

A White House memo outlined that the current government structure is overly bureaucratic and inefficient, emphasizing the need to eliminate redundant programs and focus spending on law enforcement, border security, and national defense.

In parallel, Trump introduced the controversial "Trump Gold Card" initiative, proposing that wealthy foreigners could buy U.S. residency for $5 million through this new program.

Trump stated:

“If we sell a million of these, that’s $5 trillion. If we sell ten million, that’s $50 trillion. This could be the new path to citizenship… The wealthy will come to our country, spend a lot of money, and pay a lot of taxes.”

A $50 trillion cash infusion would more than offset the current U.S. national debt of $36 trillion.

The Trump Gold Card program aims to replace the existing EB-5 investor visa program, which currently grants U.S. visas to individuals who invest a minimum of $1 million (or $800,000 in designated areas) and create jobs for Americans.

Bitcoin also plays a key role in Trump’s economic vision. The President has expressed a clear desire for BTC to rise to $150,000 during his term, reinforcing his support for Bitcoin as a financial tool.

Trump’s administration has already established the Department of Government Efficiency (DOGE) to optimize government spending and reduce debt. The sale of Trump Gold Cards aligns with this initiative. Additionally, Trump has hinted at establishing a national Bitcoin reserve, arguing that a rising BTC price could help pay off a portion of the national debt.

Binance CEO: Bitcoin’s Drop Is Temporary

Binance CEO Richard Teng shared his insights on the current market fear, emphasizing that this correction is temporary. He urged investors to stay informed, maintain conviction, and recognize the long-term fundamentals of crypto.

In his statement, he highlighted that:

• Recent market volatility should be seen as a tactical pullback rather than a trend reversal.
• Crypto has faced similar corrections before and has always rebounded stronger.
• Institutional adoption remains robust, with continued inflows into Bitcoin ETFs despite short-term outflows.

Market corrections, while psychologically challenging, often present opportunities for long-term investors to accumulate assets at a discount. Bitcoin, as an integral part of the financial system, has demonstrated resilience to macroeconomic shocks, and its long-term trajectory remains upward.

Supporting Teng’s perspective, on-chain data confirms that Bitcoin accumulation is accelerating. Over 13,000 BTC (~$1 billion) was withdrawn from Coinbase and Bitfinex on February 26, signaling strong institutional buying at lower prices.

Regulatory Shifts in the U.S.: Positive Crypto Developments

In a landmark decision, the U.S. House Ways and Means Committee voted to repeal the IRS crypto tax reporting requirement. The vote ended 26-16 in favor of overturning the controversial law, which previously required custodial brokers (such as crypto exchanges) to collect and report extensive user data to the IRS.

This vote signals growing political opposition to overregulation of crypto. The next step is a full House vote, where lawmakers will decide whether to permanently block the reporting requirements.

Additionally, pro-crypto U.S. lawmakers have expressed optimism about upcoming bipartisan legislation for stablecoins and crypto market structure. Senator Cynthia Lummis confirmed that Congress is nearing the final stages of drafting comprehensive crypto regulations, with the expectation that these bills will reach President Trump’s desk for approval this year.

Conclusion: Market Panic vs. Long-Term Vision

Bitcoin’s recent drop to $82,300 triggered a wave of fear and ETF outflows, but long-term fundamentals remain unchanged. Despite geopolitical uncertainty and short-term volatility, institutional accumulation continues, and regulatory clarity is improving.

Trump’s economic policies, including federal budget cuts, the Trump Gold Card initiative, and Bitcoin advocacy, could shape the future trajectory of digital assets. Meanwhile, Binance’s CEO reassures investors that Bitcoin’s drop is a temporary correction.

As always, the key to navigating the crypto market is staying informed, managing risk, and maintaining a long-term perspective.