We observe that escalating geopolitical tensions and macro risk aversion are contributing to liquidity constraints that are weighing on both crypto and traditional markets.

Recent sell-offs across risk assets, including sharp crypto liquidations exceeding $1.6–$1.7 billion amid risk-off dynamics, illustrate how geopolitical uncertainty can trigger widescale deleveraging and price pressure in crypto, often coordinated with moves in gold, equities, and broader liquidity flows.

Sentiment gauges such as the Fear & Greed Index have been driven toward extreme fear in these episodes, reinforcing that emotional stress can dominate price action even when long-term fundamentals, network adoption, institutional frameworks, and on-chain activity remain supportive over the medium term.

Historically, buying during these peak fear periods has often led to strong long-term returns as markets normalize once uncertainty recedes.

On the derivatives side, short-term implied volatility exceeding long-term implied volatility, which puts pricing at a premium over calls, signals that markets are currently pricing bearish conviction and wanting downside protection, which often precedes capitulation or washouts when sentiment extremes shift.

Implied volatility skews like these are consistent with heightened demand for downside hedges and reflect how traders are positioning for further short-term drawdowns.

Amid thinner liquidity conditions, sharp wick rebounds and dispersion in risk assets can occur where forced selling exhausts itself and buying interest re-emerges.

To assess whether current declines are nearing an inflection point, we would watch for:

●      Sustained volume spikes at key support levels, indicating absorption of selling pressure.

●      RSI divergences or oversold conditions on weekly timeframes that reflect capitulation exhaustion.

●      Stabilization in sentiment indicators like the Fear & Greed Index moving away from extreme fear toward neutral levels.

These signals can help identify when a bottoming process may be forming and inform strategic entries that support disciplined positions as liquidity returns and volatility moderates.

Gracy Chen, CEO at Bitget

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