Digital Asset market sentiment has plunged to "Extreme Fear," with the Fear & Greed Index hitting a nine-month low of 10 amid a broad market sell-off. The downturn saw Bitcoin break below the key $100,000 psychological level, currently sitting around $95,000.
The sell-off appears to be a toxic confluence of profit-taking by long-term holders, institutional outflows, macro uncertainty, and a wipeout of leveraged long positions. This macro unease is fueled by fading hopes for a Federal Reserve rate cut (with CME’s FedWatch tool showing odds near 50%) and lingering uncertainty from key economic data delays caused by the recent government shutdown.
However, a more subtle and persistent issue is crippling the market: a structural collapse in liquidity. The October liquidation cascade triggered a lasting exodus of market-makers. Bitcoin's average cumulative depth at 1% from the mid-price has plummeted from nearly $20 million in early October to just $14 million. Ether shows a parallel pattern, with its 1% depth dropping from $8 million to under $6 million.
This is not a temporary dislocation but a deliberate reduction in market-making commitment, establishing a new, lower baseline for stable liquidity. This shift is underscored by massive institutional outflows, with $360 million pulled from digital asset products last week, including nearly $1 billion from bitcoin ETFs.
While a basket of major altcoins (SOL, XRP, ATOM, ENS) saw a rapid technical recovery in depth post-panic, their liquidity also remains meaningfully lower than before the washout.
The practical consequence is a market that is far more fragile. With "thin" order books, it now takes significantly less capital to move spot markets, leaving traders exposed to exaggerated price swings and severe slippage. As market-making appetite remains suppressed, traders should brace for very sharp moves ahead.
Bitcoin is currently navigating a significant 41-day correction, trading at $95,000, which reflects a 24% decline from its October all-time high of $126,000. The market faces a critical test, as it must secure a bounce within the next week to maintain the integrity of the current cycle. A failure to hold this support would likely lead to a deeper drop before any larger recovery can be staged.
This price weakness is exacerbated by a challenging macroeconomic environment. So far in 2025, Bitcoin has been the worst-performing major asset with a mere 1% gain, standing in stark contrast to gold's 55% rally—a dynamic not previously seen in this cycle. Furthermore, market optimism has faded following news that the anticipated $2,000 tariff-funded dividend payments will require congressional approval, casting doubt on a potential influx of new capital that traders had previously priced in. Despite this pressure, this cycle has seen similar deep pullbacks that established major bottoms, such as the lows at $25,000 (Sep 2023), $49,000 (Aug 2024), and $75,000 (Apr 2025). This historical pattern raises the question of whether the market is once again forming a major low.
Looking ahead, the market's direction next week will be determined by the institutional reaction to any emerging recovery optimism. With Bitcoin lower support, the key question is whether large-scale capital will view this as a definitive cycle low and begin to re-enter. Institutional flows will be monitored to see if "smart money" starts to buy into this dip, or if they remain on the sidelines.
This institutional decision-making will be driven by the macroeconomic outlook, specifically the Federal Reserve. As the market awaits clarity on the Fed's timeline for potential interest rate cuts, any incoming economic data will be scrutinized for clues; signals that the Fed is preparing to cut rates could ignite a strong recovery for risk assets like Bitcoin, while a continued "higher for longer" stance will likely keep the market suppressed.