Crypto, Stock Investors in Limbo as Sentiment Swings Between Fear and Greed

Key Takeaways

• Investor sentiment is deteriorating, even as the S&P 500 remains near its all-time high.
• Consumer confidence has dropped, and bearish sentiment is at its highest since March 2023.
• President Trump’s tariff proposals have rattled global markets, adding to investor fears.

Investor sentiment is on shaky ground, with markets caught between optimism and anxiety.

Despite the S&P 500 hovering near record highs, growing fears over economic policy, inflation, and global trade tensions have pushed key sentiment indicators into “extreme fear” territory.

At the same time, the crypto market is reeling from a wave of uncertainty.

The latest downturn comes as investors react to shifting U.S. policies, the fallout from a major Bybit hack, and broader concerns about inflation and Federal Reserve decisions.

With fear rising but markets holding steady, traders find themselves in limbo, waiting for clearer signals on where prices are headed next.

Investor Sentiment Hits Extreme Fear Levels

Despite the market’s resilience, investors are showing signs of unease.

Analysts at Bespoke Investment Group report that the Economic Policy Uncertainty Index has surged past levels seen during the COVID-19 pandemic.

Meanwhile, the CNN Fear & Greed Index has dropped to “extreme fear,” and the American Association of Individual Investors’ latest survey shows bearish sentiment climbing to its highest level in nearly a year.

These signals of fear emerge as reports reveal a sharp decline in consumer sentiment, hitting levels last seen in late 2023.

While extreme fear can sometimes indicate a market bottom, the S&P 500 is down just 3.1% from its recent peak, leaving analysts questioning whether deeper declines could follow.

Tariffs and Policy Uncertainty Shake Markets

President Trump’s tariff policies have triggered a fresh wave of uncertainty.

U.S. stocks hit their lowest level since Trump took office as he proposed tariffs on Canada, Mexico, and China, with threats to extend them to the European Union.

The president defended the move as necessary short-term pain to secure long-term gains, arguing that the U.S. has been exploited in global trade.

The proposed tariffs include a 25% levy on Canadian and Mexican imports and a 10% tariff on Chinese goods.

Economists warn that such measures could slow global economic growth and drive up prices for U.S. consumers, further complicating the Federal Reserve’s efforts to control inflation.

With inflation concerns rising, some analysts suggest the Fed may hesitate to cut interest rates, keeping borrowing costs higher for longer—another factor contributing to market unease.

Crypto Markets Also Feel the Impact

Investor fears have spilled into crypto markets, exacerbated by the recent Bybit hack.

Bitcoin slipped below $85,000, while Ethereum (ETH) lost roughly 7% this week alone. Broader crypto markets also saw declines as sentiment soured.

The Fear & Greed Index for crypto markets has dropped to an “extreme fear” level of 21—the lowest since mid-2024.

The last time sentiment fell into this range, Bitcoin saw an initial drop, followed by a gradual recovery that eventually led to record highs.

Studies show that emotional reactions—particularly fear—play a significant role in Bitcoin’s price swings, making the asset especially vulnerable to market uncertainty.

As investors weigh economic risks and policy shifts, markets remain in limbo, searching for direction amid growing uncertainty.