Key Takeaways:

• Fear and Greed index drops to 9, reflecting extreme market anxiety.
• BTC derivative traders lost $2.6 billion in 24 hours on 6 February 2026.
• Analysts are pointing to the oversupply of ‘paper Bitcoin’, causing downward pressure, amongst other issues.

Bitcoin (BTC) has tumbled below the critical $63,000 support level, as the market sentiment tracker ‘Fear and Greed Index’ falls to 9, indicating extreme fear.

The rapid fall has sparked a wave of sell-offs that have wiped almost $2.6 billion from the BTC derivatives market in 24 hours on 6 February, 2026.

The Fear and Greed index plummets to 9

The crypto Fear and Greed Index is a widely watched barometer of market sentiment, which goes from 0 to 100. With the index now touching 9, it reflects a high level of anxiety, where most are afraid to buy and many are selling in fear of further price drops.

This level of panic was last witnessed on 16 November 2025. During this, massive institutional outflows and attempts to curb inflation by the Federal Reserve triggered a heavy downward move. When the U.S. government raises interest rates (making it more expensive to borrow money), people get cautious. Instead of buying things like Bitcoin, they keep their cash in a bank where it feels safer. This ‘drains the pool’ of money available to buy crypto.

The index dropped to similar lows in June 2022 following the collapse of the Terra (LUNA) ecosystem.

BTC derivatives are being blamed this time

The blame for the current slide in the index is being put on the dominance of Bitcoin derivatives, such as cash-settled ETFs and perpetual futures. These are financial instruments that allow traders to speculate on the price of an asset, such as BTC, without ever owning it.

This has led to the rise of paper Bitcoin, where traders hold a contract that says they will be provided money equivalent to the BTC price when the contract ends. This creates an artificial supply of BTC that exists only in books. 

The concern for long-term holders is twofold:

• Dilution of scarcity: One reason people love Bitcoin is because it’s strictly limited to a total supply of 21 million coins. But the contracts only track the price and have nothing to do with the fixed supply. This effectively creates an infinite supply of ‘paper BTC’, making the actual cryptocurrency feel less rare.
• Off-chain influence: With large volumes of money entering and exiting the contracts, the Bitcoin price is increasingly being affected by these derivatives. Any significant movement also influences the BTC price.

Geopolitics and global economies are also at play

Bitcoin, while digital, reacts to world events like any other asset. Rising tensions in the Middle East and a surging US Dollar are making investors nervous. When the world feels unstable, big investors often pull money out of risky assets like BTC.

Uncertainty over Federal Reserve interest rates means borrowing money is expensive. This drains the extra cash people usually use to buy crypto, whether the real ones or paper Bitcoin.

Glossary of Terms: 

• Paper Bitcoin: A kind of digital receipt for Bitcoin that isn’t the real thing. 
• Derivatives: Side-bets on the price without actually owning any of the asset itself. 
• Fed Interest Rates: The ‘cost of money’. As these rise, the price of crypto often falls. 
• Support Level: A ‘foundation’ level where the price usually stops dropping.