BTC Fear & Greed Index Declines on BTC Return to Sub-$16,000

Key Insights:

• On Monday, bitcoin (BTC) rose by 1.72%. Marking the second gain from nine sessions, BTC ended the day at $16,626.
• While investor angst over the FTX collapse and contagion fear continued to weigh, news of the Binance recovery fund launch delivered support.
• However, the Bitcoin Fear & Greed Index fell from 24/100 to 22/100, weighed by the BTC fall to sub-$16,000.

On Monday, bitcoin (BTC) rose by 1.72%. Partially reversing a 2.80% fall from Sunday, BTC ended the day at $16,626. Notably, BTC logged the second gain from nine sessions while ending the day at sub-$17,000 for the fourth time since 2020.

A bearish start to the day saw BTC slide to an early low of $15,822. BTC fell through the First Major Support Level (S1) at $16,081. However, steering clear of the Second Major Support Level (S2) at $15,818, BTC rallied to an early afternoon high of $17,200. BTC broke through the First Major Resistance Level (R1) at $16,782 before ending the day at $16,626.

Bearish sentiment towards contagion risk delivered early losses. However, news of Binance launching a crypto recovery fund supported a BTC return to $17,000. While there was a lack of progress toward an FTX bailout, a recovery fund to support FTX-impacted projects would be the next best thing.

The shift in sentiment supported a further decoupling from the NASDAQ Composite Index, which fell by 1.12%. Market uncertainty over Fed monetary policy left the Index in the red ahead of US wholesale inflation numbers due out later today.

Near-term, we expect signs of contagion and further announcements on the Binance recovery find to remain the key drivers.

The Fear & Greed Index Slips Despite BTC Brief Return to $17,000

Today, the Fear & Greed Index decreased from 24/100 to 22/100. The reversal of Monday’s increase came as BTC fell back from $17,000, raising question marks over the sustainability of any breakout.

The return to 22/100 also reflected investor uncertainty over the impact of the FTX collapse on the broader crypto market.

While continuing to avoid sub-20, the Index tumbled to sub-10 in May following the collapse of Terra. Any negative news linked to the FTX collapse and contagion could send the Index back to May levels, which would spell more trouble for BTC.

Therefore, the Index would need to avoid sub-20/100 to support a return to 40 and a move into the neutral zone. However, a fall to sub-20/100 would see BTC face the risk of sub-$10,000.

Bitcoin (BTC) Price Action

At the time of writing, BTC was up 0.08% to $16,640. A range-bound start to the day saw BTC fall to an early low of $16,585 before rising to a high of $16,686.

Technical Indicators

BTC needs to avoid the $16,549 pivot to target the First Major Resistance Level (R1) at $17,277. A return to $17,000 would signal a bullish session. However, the direction will hinge on FTX updates, contagion news, and Binance recovery fund details.

In the case of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $17,927 and resistance at $18,000.

The Third Major Resistance Level (R3) sits at $19,305.

A fall through the pivot would bring the First Major Support Level (S1) at $15,899 into play. Barring another extended sell-off, BTC should avoid sub-$15,000. The Second Major Support Level (S2) at $15,171 should limit the downside. However, negative FTX-related news could send BTC to sub-$15,000.

The Third Major Support Level (S3) sits at $13,793.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bearish signal. This morning, bitcoin sat below the 50-day EMA, currently at $17,633. The 50-day EMA fell back from the 200-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A move through R1 ($17,277) would give the bulls a run at the 50-day EMA ($17,633) and R2 ($17,927). However, failure to move through the 50-day EMA would leave BTC under pressure and S1 ($15,899) in view.