A leading cryptocurrency index is flashing a warning of “extreme fear” as bearish sentiment persists despite the recovery in prices for digital assets such as Bitcoin (CRYPTO: $BTC).

The “Crypto Fear & Greed Index” currently has one of the deepest “extreme fear” readings of the current downturn in prices for digital assets such as Ethereum (CRYPTO: $ETH).

The total cryptocurrency market cap is at $2.36 trillion U.S., down from more than $4 trillion U.S. a year ago as investors continue to de‑risk and rotate out of Bitcoin and altcoins. 

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Market data shows that despite the recovery on March 23, investors, particularly large institutions, continue to sell crypto and move into cash and stablecoins.

The extreme fear reading comes on a day when BTC, ETH, and other cryptocurrencies such as Solana (CRYPTO: $SOL) are up 5% or more, gaining ground alongside stocks.

Markets are rebounding from four weeks of losses after U.S. President Donald Trump signalled a deescalation in the war with Iran.

Some analysts are quick to warn that investors shouldn’t be complacent with crypto given that bearish sentiment towards digital assets persists. 

However, other analysts point out that extreme fear warnings have typically preceded crypto markets hitting a bottom and then staging a meaningful recovery.

Some market observers are wondering aloud if the market might be nearing capitulation after Bitcoin’s price has fallen 44% since hitting an all-time high of $126,000 U.S. last October. 

BTC is currently trading at $71,000 U.S. and up 4% on March 23.