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The Extremity Premium: Sentiment Regimes and Adverse Selection in Cryptocurrency Markets

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  • Murad Farzulla

Abstract

Using the Crypto Fear & Greed Index and Bitcoin daily data, we document that sentiment extremity predicts excess uncertainty beyond realized volatility. Extreme fear and extreme greed regimes exhibit significantly higher spreads than neutral periods -- a phenomenon we term the "extremity premium." Extended validation on the full Fear & Greed history (February 2018--January 2026, N = 2,896) confirms the finding: within-volatility-quintile comparisons show a significant premium (p

Suggested Citation

  • Murad Farzulla, 2026. "The Extremity Premium: Sentiment Regimes and Adverse Selection in Cryptocurrency Markets," Papers 2602.07018, arXiv.org, revised Feb 2026.
    • Handle: RePEc:arx:papers:2602.07018
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