The cryptocurrency market is plunging as Bitcoin ends February on a bearish note amidst Trump's tariffs, Bybit hack, and massive selling by institutions.

Plunging prices have market sentiments turning to ‘Extreme Fear' based on the Crypto Fear & Greed Index, which has a reading of 10 on a scale of 1 to 100.

The cryptocurrency market is plunging as Bitcoin ends February on a bearish note. The market sentiments have turned to "Extreme Fear" with a reading of 10 on a scale of 1 to 100, according to the Crypto Fear & Greed Index.

This compares with last week's "Neutral" reading of 49. Meanwhile, last month, the index had a reading of 72 ("Greed") and 94, signifying "Extreme Greed" in November.

The sentiments reflect the market condition perfectly, with a -22.14% drawdown. It is actually the worst February since 2014, when BTC went down about 31%.

This is also the reddest month for Bitcoin since June 2022, when the world's largest cryptocurrency's performance was -37.28%. According to crypto data provider Santiment, Bitcoin whales and sharks have dumped ~6,813 coins since last week, which is the largest drop since last July.

Similar data is presented by IntoTheblock, which noted that addresses holding between 10k and 100k BTC were the primary sellers during this dip.

At the same time, significant deleveraging is taking place, with short-term traders' account balances dropping to levels not seen since October 2024. IntoTheblock noted:

"By flushing out excessive speculation, the market may have formed a healthier base for sustained upward momentum."

A decline in BTC price means a crash in altcoins, which have already been performing badly for months now. And with Bitcoin's negative performance, they have been simply obliterated.

The market rout started this week when the BTC price was around $96K, only for it to fall below $78,400 on February 28. With that, the total cryptocurrency market cap has fallen down to $2.7 trillion. The crypto market is currently in a precarious situation, and it's hard to say if this is the bottom.

The $1.57 trillion market cap of Bitcoin is now down 28% from its all-time high (ATH) of 109,000 hit on January 20, the day Donald Trump was inaugurated as the 47th President of the United States.

The correction level is fast intensifying, already above this cycle's average drawdown of -8.54%; it is now also surpassing the maximum drawdown of -26.25%, though still nowhere near past cycle's crashes.

According to Glassnode, there is an air gap in realized supply between $70K and $88K, with these ranges having lower realized supply concentration due to strong trends leading to price appreciation that tends to outpace capital inflows.

With Bitcoin price plunging to the level last seen in mid-November, during its uptrend following Trump's win, "recent investors are experiencing severe psychological stress."

A decline in new investor profitability also means "significant unrealized losses, a condition historically leading to capitulation events or forced sell-offs during market downtrends."

Additionally, Short Term Holder Spent Output Profit Ratio (STH-SOPR), which measures whether short-term holders are selling at a profit or loss, has dropped significantly under one standard deviation threshold (-0.01), suggesting a notable increase in loss realization as many recent buyers are exiting positions at a loss. Glassnode stated:

"Historically, deep SOPR contractions have led to at least temporary market stabilization as weaker hands exit. However, under current macroeconomic conditions, the risk remains that the price decline could extend further if no strong demand catalyst emerges."

While the pain is severe right now, not all hope is lost yet. Trader Bob Louaks believes we are very much in the bull market, and the ongoing dip is simply a correction that prepares the largest crypto asset for a more aggressive move, as seen in the last leg of bull cycles.

Data provider IntoTheblock also noted that despite the selling, Bitcoin addresses are busy accumulating more BTC, which indicates that traders are utilizing the dip to add to their BTC positions.

Spot Bitcoin ETFs Record Massive Outflows

It's been more than a year since Spot Bitcoin exchange-traded funds (ETFs) were approved by the US Securities and Exchange Commission (SEC) in early January. During this period, these ETFs registered substantial inflows that helped BTC prices reach new heights.

But of course, this journey wasn't all up only. There have been periods where these investment vehicles experienced significant outflows for several days straight.

For instance, last year in March, there were five consecutive days of outflows, which increased to seven in late April-early May and then to eight in June and late Aug-early Sept, according to data from Farside. The rest of the days weren't all inflows, but they still dominated.