The crypto sentiment index drops back to March ‘fear’ levels during the Binance lawsuit

The Crypto Fear and Greed Index – a tool that measures broader market sentiment towards Bitcoin and the wider crypto market – has fallen to a level of “fear” not seen since March 11 this year, when the USD coin of Circle (USDC) momentarily lost its dollar peg.

The hiccup in market sentiment comes after the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance, its US arm of operations and its CEO Changpeng Zhao.

The SEC filed a total of 13 charges against the exchange and its affiliates for failing to register as a stock exchange and operating illegally in the United States.

The index works by putting together a combination of indicators to measure market sentiment. It combines metrics such as price volatility, momentum, trading volume with social media data and Google trends to form an overall picture of investor emotions towards Bitcoin and the wider crypto market.

Much of the negative sentiment is due to the immediate plunge in the value of cryptocurrencies following the SEC’s latest action against Binance. Blue-chip crypto assets such as Bitcoin and Ethereum (ETH) are down 4.1% and 3.1% respectively in the past 24 hours according to Cointelegraph Price Index data.

The larger altcoins also took a beating. At the time of publication, Cardano (ADA) is down 6.4% in the last 24 hours, while Solana (SOL) is down 7.4%.

Related: SEC complaint refers to why Brian Brooks resigned as CEO of Binance.US

Traders with open positions in crypto derivatives markets also suffered the impact, with more than $280 million in liquidations since the lawsuit was announced.

Unsurprisingly, traders with open “long” positions – a leveraged bet on crypto asset price appreciation – were the hardest hit, accounting for $261.75 million (92%) of total liquidations. Meanwhile, short traders experienced $20.7 million in liquidations. The two largest digital assets accounted for about 43% of these losses.

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