Bitcoin (BTC) in for Another Choppy Week with the FED in Action

It was a tough week for Bitcoin (BTC) and the broader market in the week ending 23^rd January. Reversing a 2.92% gain from the previous week, Bitcoin slid by 15.73% to end the week at $36,308.

A 3.43% gain on Sunday limited the downside. 5-days in the red from 7 that included a 10.38% sell-off on Friday did the damage, however.

Things were not much better elsewhere, with ADA (-20.25%), ETH (-24.13%), LTC (-23.31%), and XRP (-19.16%) seeing heavier losses. Amongst the worst performers in the week, however, was SOL, which tumbled by 32.57%.

As a result of the crypto sell-off in the week, the total crypto market cap fell by $408bn to end the week at $1,661bn. In November, the total market cap had risen to an ATH $3,009bn before stumbling to a current month low $1,514bn.

Key Market Drivers

FED monetary policy was the key driver in the week. Market jitters across the global financial markets led to the NASDAQ tumbling into correction territory. An extended tech stock rout stemming from the markets pricing in 4 FED rate hikes to curb inflation did the damage. In the week ending 21^st January, the NASDAQ slid by 7.55%.

For Bitcoin and the broader crypto market, regulatory chatter and activity continued to be another source of market angst.

Following news going into the weekend of Russia’s central bank proposing to ban cryptos and crypto mining, updates early this week will be key. There may also be follow-up chatter from last week’s U.S Congress subcommittee hearing on crypto and crypto mining.

The markets will need to continue monitoring regulatory chatter and activity from elsewhere. Following calls from the Bank of England and the IMF for a global regulatory framework, more activity is likely. Last week, SEC Chair Gensler warned of increase scrutiny near-term. The warning followed a call from India’s Prime Minister Modi for “global cooperation and a common approach towards addressing emerging challenges posed by cryptocurrencies” at DAVOS 2022.

The Bitcoin Fear & Greed Index

As at 23^rd January, the Bitcoin Fear & Greed Index stood at 11/100. While continuing to hold above 8^th January’s low of 10/100, the Index has retreated from a current month high 24/100.

The index currently sits in the red, reflecting the market’s bearish sentiment. A move back through to 30/100 and into the orange needed to reflect any shift in sentiment. Back in November, the Index had risen to 84/100 on 9^th November before hitting reverse.

Crypto Interconnectedness with U.S Equity Markets

Last week the NASDAQ slid by 7.55%, taking the index into corrective territory. For Bitcoin and the broader market, a bullish start to the week for the NASDAQ would provide some respite.

At the time of writing, the NASDAQ 100 mini was up 131.5 points, a positive signal for the crypto market.

Bitcoin Price Action

At the time of writing, Bitcoin was down by 0.93% to $35,969. For the week ahead, a move through this week’s $37,918 pivot would be needed to bring $40,000 levels back into play. Barring an extended crypto rally, however, Bitcoin will likely come up short of last week’s high $43,591. The first major resistance level at $41,981 would likely cap the upside.

Failure to move through this week’s pivot would leave Bitcoin under pressure for a 2^nd consecutive week. A fall back through last week’s low $33,855 would bring the first major support level at $32,245 in to play.

In the event of another extended sell-off, Bitcoin could test support at the 62% FIB of $28,814 and the second major support level at $28,182.