BTC Fear & Greed Index Signals Extreme Fear and a Bearish Session

Key Insights:

• It was a bullish Friday, with BTC rising by 0.75% to end the day at $16,968.
• US economic indicators supported demand for riskier assets, with bets of a 50-basis point February Fed rate hike sliding.
• However, the Fear & Greed Index fell from 26/100 to 25/100, returning to the Extreme Fear zone.

On Friday, bitcoin (BTC) rose by 0.75%. Reversing a 0.13% loss from Thursday, BTC ended the day at $16,968. BTC revisited $17,000 for the second time in three sessions while avoiding sub-$16,500.

After a bearish morning, BTC fell to an early afternoon low of $16,687. BTC fell through the First Major Support Level (S1) at $16,782 and the Second Major Support Level (S2) at $16,722.

However, finding afternoon support, BTC rallied to a late high of $17,200. BTC broke through the Major Resistance Levels before a pullback through the Third Major Resistance Level (R3) at $17,061 to end the day at $16,968.

US Economic Indicators and the NASDAQ Index Deliver BTC Support

It was a busy Friday session, with US economic indicators driving demand for riskier assets. The December jobs report and ISM Non-Manufacturing PMI eased hawkish Fed bets.

In December, nonfarm payrolls increased by 223k versus 256k in November, while wages grew at a slower pace of 0.3% versus 0.4% in November. The US unemployment rate fell from 3.6% to 3.5%, with the participation rate rising from 62.2% to 62.3%.

The ISM Non-Manufacturing PMI fell from 56.5 to 49.6, with the Employment index declining from 51.5 to 49.8. Also market friendly was a fall in the Prices index from 70.0 to 67.6.

The markets responded to the slower wage growth and contraction in the services sector, with the NASDAQ Index and S&P 500 seeing gains of 2.56% and 2.28%, respectively. According to the FedWatchTool, the probability of a 25-basis point Fed rate hike jumped from 58.1% to 75.7% on Friday.

FOMC Member Bostic reportedly insinuated a 25-basis point rate hike in February, supporting market sentiment toward Fed monetary policy.

Today, there are no stats to provide direction, leaving BTC in the hands of the crypto news wires and Fed policy expectations. While easing bets of a 50-basis point Fed rate hike is positive, fears of a US economic recession and crypto regulatory risk remain headwinds.

The Fear & Greed Index Returns to the Extreme Fear Zone

Today, the BTC Fear & Greed Index fell from 26/100 to 25/100, the decline pulling the Index into the Extreme Fear zone.

Notably, the Index fell despite a bullish BTC session, with the decline likely reflecting investor sentiment toward a shift in the regulatory landscape and jitters over a US recession. The contraction in the services sector sounded the alarm bells.

Avoiding sub-20/100 remains the key near-term. The bulls will need to target the pre-FTX collapse November 6 high of 40/100 to support a BTC run at $20,000.

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.04% to $16,962. A range-bound start to the day saw BTC fall to an early low of $16,951 before rising to a high of $16,990.

Technical Indicators

BTC needs to avoid a fall through the $16,952 pivot to target the First Major Resistance Level (R1) at $17,216. A return to $17,000 would signal a bullish session. However, the crypto news wires should be market-friendly to support a breakout.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $17,465 and resistance at $17,500. The Third Major Resistance Level (R3) sits at $17,978.

A fall through the pivot would bring the First Major Support Level (S1) at $16,703 into play. Barring a crypto risk-off-fueled sell-off, BTC should avoid sub-$16,500 and the Second Major Support Level (S2) at $16,439. The Third Major Support Level (S3) sits at $15.926.

An adverse crypto market event would bring sub-$16,000 into play.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a more bullish signal. BTC sat above the 200-day EMA, currently at $16,917. The 50-day EMA converged on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A bullish cross of the 50-day EMA through the 100-day EMA would support a run at R1 ($17,216). However, a fall through the 200-day EMA ($16,917) would give the bears a run at the 100-day ($16,794) and 50-day ($16,785) EMAs and S1 ($16,703). A fall through the 50-day EMA would be a bearish signal.