The Crypto Fear and Greed Index, a tool that measures broader market sentiment towards Bitcoin and the broader crypto market, has dipped to a level of “fear” not witnessed since March 11 this year. The stumble in market sentiment comes in the wake of the United States Securities and Exchange Commission (SEC) filing a lawsuit against Binance, its U.S. arm of operations, and its CEO Changpeng Zhao. The SEC pressed a total of 13 charges against the exchange and its affiliates for failing to register as a securities exchange and operating illegally in the United States.
The index works by aggregating a mixture of indicators to gauge market sentiment. It combines metrics including price volatility, momentum, trading volume with data from social media and Google trends to form an overall picture of investors’ emotions towards Bitcoin and the wider crypto market. Much of the negative sentiment owes to the immediate plunge in the value of cryptocurrencies following the SEC’s latest move against Binance. Blue-chip crypto assets such as Bitcoin and Ethereum are down 4.1% and 3.1% respectively in the last 24 hours according to data from Cointelegraph Price Index.
The larger altcoins also took a beating. At the time of publication, Cardano is down 6.4% in the last 24 hours, while Solana has fallen 7.4%. Traders with open positions on crypto derivatives markets also suffered consequences, with more than $280 million worth of liquidations occurring since the announcement of the lawsuit. Unsurprisingly, traders with open “long” positions—a leveraged bet on the price of crypto assets increasing—were the hardest hit, accounting for $261.75 million (92%) of the overall liquidations. Meanwhile, short traders experienced $20.7 million in liquidations. The top two digital assets were responsible for around 43% of these losses.
In summary, the recent SEC lawsuit against Binance has caused fear and negative market sentiment, leading to a significant drop in cryptocurrency prices and substantial liquidations in trading positions. While some investors may see this as a temporary setback, others may argue that increased regulations are needed to protect consumers and foster innovation in the crypto space.