From 68 to 30 in a week: The crypto Fear & Greed index plunges after Binance hack

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But the drop did not wait for Binance. On October 22, the index still showed 68 points, comfortably settled in the greed zone. It had already fallen to 51 when the platform reported the incident, then it gave up twenty-one additional points in the process, or thirty-eight points evaporated in seven days. Seventeen of these points were gone even before the attack, with no major event to explain them.

Calculated every day by Alternative.me, the Fear & Greed Index aggregates volatility, momentum of volumes, signals from social networks, the dominance of Bitcoin and Google searches (which remember that volatility and volumes alone weigh half of the final score). The scale goes from 0 to 100. Below 25 begins extreme fear, above 75 extreme greed. At 30, the market entered the fear zone without falling into panic.

The onchain analytics platform tempers any optimistic reading. For CryptoQuant, an improvement will only be confirmed by a lasting recovery in sentiment and prices, with the two curves expected to start together again. The weight of Binance in the equation is not incidental: the world's leading platform in terms of spot volume, it weighs on aggregate indicators much more heavily than a second-tier player.

Binance, however, is not its first security incident. In May 2019, 7,000 bitcoins were stolen from a hot wallet on the platform, around $40 million at the time. Changpeng Zhao, then general manager, had drawn on the SAFU (Secure Asset Fund for Users) to reimburse all of the stolen sums. This insurance fund, fueled since 2018 by 10% of trading fees collected, was increased to one billion dollars in 2022. No user had lost a satoshi.

The market had absorbed the shock in a few sessions. Bitcoin was trading near $5,900 at the time of the announcement and topped $13,000 seven weeks later.

Low readings of this indicator have rarely constituted good selling signals. The index had fallen to 6 on June 19, 2022, its lowest since the crash of March 2020. Bitcoin had just touched $17,600, the lowest point of its entire cycle. A few weeks earlier, the Terra ecosystem had collapsed and taken some of the market's confidence with it.

Thirty points, on a scale of one hundred, describe a nervous market more than a distressed market.

The index did not cross the 25 points which separate fear from extreme fear. Twenty-six points still separate it from its average for the past month, and CryptoQuant is waiting to see prices follow suit before talking about a recovery. The week ahead promises to be particularly delicate, take care of yourself (and your wallets).

Machine-translated from French