I would have to know much more about you to know with certainty what is causing your problems but it seems as if you may have social anxiety. If I were able to interview you in person I would want to explore the change process that took you from being a very outgoing person to presently struggling with social interaction. Was there a negative event or series of events that may have led to your current anxiety? Something is responsible for your loss of confidence. You had it once and now it’s gone. In addition to anxiety you may also be experiencing depression. It is very common for anxiety and depression to co-occur.
Generally speaking, when interacting with others try to be yourself. Try not to worry about what others think about you because you cannot control what they will ultimately perceive. In every social interaction you should strive to be authentic, down-to-earth, and attempt to communicate with others in a sincere way. In other words, simply try to be yourself. Nervousness often occurs when an individual attempts to be someone that they are not or simply are guilty of “trying too hard.” If you focus on trying to be yourself, then the nervousness should diminish.
If this is an issue that you continue to struggle with then you may want to consider counseling. Counseling is a great way to improve social interaction skills.
Even if it is uncomfortable at this time, you should continue interacting with others. The more you interact with others, the more practice you will get and the more likely it is you will improve. A therapist can teach you valuable new skills in addition to their giving you objective feedback about your present interaction skills. If counseling is not an option, ask your parents if they may be able to assist you. They may be able to assess your interaction skills and give you tips about how to relax in social situations.
Your sleep problems should not be overlooked. I would recommend a therapeutic evaluation of your total situation: sleep problems, social anxiety and any other changes that you may have failed to include in your letter.