BTC Fear & Greed Index Slides in Response to US CPI Report

Key Insights:

• On Tuesday, bitcoin (BTC) ended a six-day winning streak with a 9.91% tumble to $20,175.
• Market reaction to the US CPI report for August and shift in sentiment towards Fed monetary policy sent BTC and the broader crypto market into the red.
• The Bitcoin Fear & Greed Index slid from 34/100 to 27/100, weighed by a BTC slide to sub-$20,000

On Tuesday, bitcoin (BTC) tumbled by 9.91%. Reversing a 2.57% gain from Monday, BTC ended the day at $20,175.

Bullish through the morning session, BTC rose to a mid-day high of $22,794 before hitting reverse. BTC broke through the First Major Resistance Level (R1) at $22,832 before tumbling to a low of $19,883.

The sell-off saw BTC slide through the day’s Major Support Levels. While returning to $20,000, the Third Major Support Level (S3) at $20,289 pegged BTC back late in the session.

The US CPI report for August sent BTC crashing to sub-$20,000 as investors shifted bets on Fed monetary policy.

In August, the US annual rate of inflation softened from 8.5% to 8.3%, while the core annual rate of inflation accelerated from 5.9% to 6.3%. Economists forecast inflation rates of 8.1% and 6.1%, respectively.

The numbers raised bets of a percentage point rate hike at next week’s FOMC meeting and a more hawkish move in November. The numbers also sent the NASDAQ 100 into a tailspin. On Tuesday, the NASDAQ 100 tumbled by 5.16%, the largest one-day loss since the start of the COVID-19 pandemic.

US economic indicators are back in focus today. US wholesale inflation figures could test investor resilience further. A pickup in wholesale inflationary pressure would point to an uptrend in consumer prices in the coming months.

Bitcoin Fear & Greed Index Slides to sub-30 but Avoids Extreme Fear

Today, the Fear & Greed Index slid from 34/100 to 27/100. Despite the slide, the Index avoided a return to the Extreme Fear zone, suggesting a degree of investor resilience.

However, the return to sub-30 delivers uncertainty in the wake of the US CPI report. 20/100 remains the line in the sand, with an Index decline to sub-20 likely to bring sub-$18,000 into play.

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.12% to $20,150. A bearish start to the day saw BTC fall from an early high of $20,178 to a low of $20,132.

Technical Indicators

BTC needs to move through the $20,951 pivot to target the First Major Resistance Level (R1) at $22,018 and the Tuesday high of $22,794. However, US economic indicators will have to be crypto-friendly to support a return to $22,000.

While an extended crypto rally could see BTC test resistance at $23,000, BTC will likely fall short of the Second Major Resistance Level (R2) at $23,862. The Third Major Resistance Level (R3) sits at $26,773.

Failure to move through the pivot would leave the First Major Support Level (S1) at $19,107 in play. Barring another extended sell-off, BTC should avoid sub-$19,000 and the Second Major Support Level (S2) at $18,040.

The Third Major Support Level (S3) sits at $15,129.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bearish signal. This morning, BTC sat below the 100-day EMA, currently at $20,798.

The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish price signals. A bearish cross of the 50-day EMA through the 100-day EMA would support a slide to sub-$19,000.

However, a BTC move through the EMAs would shift sentiment and bring the Major Resistance Levels into play. The 200-day EMA sits at $21,145.