Extreme panic in the crypto market: How will history repeat itself?

Current Situation: Panic Index Soars

BTC, ETH, and SOL, these leading cryptocurrencies have continued to decline over the past few months, and the market fear index has reached the “Extreme Fear” range—this level has also appeared after the pandemic black swan in 2020 and the FTX crash.

It looks terrible, but from a historical perspective, this is actually a routine operation in the crypto world.

What the Data Tells Us

Since 2017, BTC has experienced more than 10 pullbacks of over 25%, with 6 of them exceeding 50% and 3 approaching 75%. Each time it ultimately rebounded to a new high.

Interestingly, extreme panic often occurs before a significant rise. Just this April, the market rebounded from extreme panic into a strong rally.

The long-term chart over the past three years doesn't look that desperate either - a significant increase usually follows a period of panic.

What will happen next

The typical cycle of the crypto market is as follows: Crazy rise → Sharp correction → Long consolidation → New round of rise

We are now in the “sharp correction” phase. If history repeats itself, the next phase will be the “long consolidation” period - investors may choose to leave due to boredom or disappointment. However, this period is the real layout phase.

The fundamentals are still there

A key detail that is often overlooked is: Although the price of the coin is falling, the RWA (Real-World Asset Tokenization) on the chain has grown by 2.3% in the past 30 days, reaching a total scale of $35.7 billion.

This means that although market sentiment has collapsed, real development has not stopped. When these infrastructures are rediscovered by the market, it will be time to rally.

Where is the real risk?

The biggest threat in the short term is not the crypto circle itself, but traditional finance: stock market fluctuations at high levels, overvaluation of AI stocks, uncertainty in trade policies, and interest rate volatility—these will all siphon off liquidity from risk assets.

If these factors worsen, it could turn the current correction into a real bear market or even a “crypto winter.”

Historical Suggestions

But even in a bear market, the history of the crypto market shows that: those who dare to buy the dip or dollar-cost average make the most profit.

If you were optimistic about BTC, SOL, and ETH at the beginning of the year, there is no reason to change your stance now. On the contrary - the lower the price, the more it is worth dollar-cost averaging, in order to maximize returns when the rebound occurs.

These cryptocurrencies may continue to decline in the short term, but they will never disappear. Winners who position themselves during extreme panic often rebound when the market pays attention again.