BTC Fear & Greed Index Returns to the Fear Zone Signaling Caution

Key Insights:

• It was a bearish Sunday, with BTC falling by 0.40% to end the day at $20,882.
• Profit-taking from a seven-day winning streak weighed, while sentiment towards FTX contagion and Fed monetary policy cushioned the downside.
• The Fear & Greed Index fell from 52/100 to 45/100 despite a BTC return to $21,000.

On Sunday, bitcoin (BTC) fell by 0.40%. Partially reversing a 5.20% rally from Saturday, BTC ended the week up by 21.83% to $20,882. Notably, BTC revisited $21,000 for the second time since November 7 while seeing a seven-session winning streak end.

A bearish start to the day saw BTC fall to an early low of $20,566. Steering clear of the First Major Support Level (S1) at $20,116, BTC rose to a late afternoon high of $21,055. However, coming up short of the First Major Resistance Level (R1) at $21,597, BTC eased back to end the day at $20,882.

Seven Session Winning Streak Ends on Profit-Taking

It was a quiet Sunday session, with no crypto events or external market forces to guide investors. The lack of crypto news left investors to catch up on events from the week.

On Thursday, news hit the wires of US lawmakers planning a subcommittee to oversee the digital asset space, which coincided with the SEC announcing charges against Gemini and Genesis.

While the markets expect US lawmakers to lead the way in introducing a regulatory framework, the SEC’s latest move against crypto players suggests another challenging year ahead. Until a regulatory framework is in place, the SEC will likely continue to regulate by enforcement, a crypto market headwind.

However, despite the bearish end to the week, easing FTX contagion risk and bets of a 25-basis point Fed interest rate hike remained tailwinds.

Today, there are no US economic indicators to guide investors, with the US markets closed. The lack of stats will leave BTC in the hands of the crypto news wires and the broader crypto market.

While there are no stats to consider, it is a busy week ahead. US corporate earnings, economic indicators, and FOMC member chatter will continue to guide riskier assets. Hawkish FOMC member chatter and the talk of 50-basis point interest rate hikes could test buyers at current levels.

This morning, the NASDAQ Mini was up 4.5 points.

The Fear & Greed Index Returns to the Fear Zone

Today, the BTC Fear & Greed Index fell from 52/100 to 45/100. Significantly, the Index returned to the Fear zone after a brief visit to the Neutral zone for the first time since August 14, 2022.

A bearish Sunday session led to the return to the Fear zone. While profit-taking and regulatory risk led to the pullback, easing FTX contagion risk and hopes of a soft landing in the US remain tailwinds.

After returning to the Fear zone, the Index would need to move back through the Sunday high of 52/100 to retarget the Greed zone. A return to the Greed zone would support the BTC move toward $25,000.

Bitcoin (BTC) Price Action

At the time of writing, BTC was up 0.70% to $21,029. A mixed start to the day saw BTC fall to an early low of $20,781 before rising to a high of $21,038.

Technical Indicators

BTC needs to avoid the $20,834 pivot to target the First Major Resistance Level (R1) at $21,103. A move through the Sunday high of $21,055 would support another bullish session. However, the crypto news wires should be market-friendly to deliver another breakout.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $21,323 and resistance at $21,500. The Third Major Resistance Level (R3) sits at $21,812.

A fall through the pivot would bring the First Major Support Level (S1) at $20,614 into play. Barring a crypto event-fueled sell-off, BTC should avoid sub-$20,000. The Second Major Support Level (S2) at $20,345 should limit the downside. The Third Major Support Level (S3) sits at $19,856.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bullish signal. BTC sat above the 50-day EMA, currently at $19,041. The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($19,041) would support a breakout from R1 ($21,103) to target R2 ($21,323) and $21,500. However, a fall through the Major Support Levels would give the bears a run at the 50-day EMA ($19,041). A fall through the 50-day EMA would signal a shift in sentiment.