Bitcoin (BTC) Back to Sub-$38,000 as Focus Shifts to Federal Reserve

Key Insights:

• Bitcoin (BTC) sees the bullish start to May reversed with a 2.05% fall to sub-$38,000 on Tuesday.
• Market angst over Fed monetary policy left the broader crypto market in negative territory.
• Bitcoin’s technical indicators continue to flash red, with Bitcoin sitting well below the 50-day EMA.

The Federal Reserve has the crypto market on tenterhooks, this week. On Tuesday, bitcoin (BTC) fell by 2.05%. Reversing a 0.09% gain from Monday, BTC ended the day at $37,725.

BTC had a bullish start to the month, after April’s 15.2% slide, with a visit to $39,000 levels before hitting reverse.

Market sentiment toward Federal Reserve monetary policy contributed to the retrace. Tuesday’s loss came despite the NASDAQ 100 gaining 0.22%.

Bitcoin Fear & Greed Index hits reverse

This morning, the Fear & Greed Index fell from 27/100 to 21/100. The decline saw the Index return to the “Extreme Fear” zone after briefly visiting the “Fear” zone on Monday.

Last month, the Index hit a month high of 53/100 on April 5, which coincided with bitcoin revisiting $47,000 levels.

The “Fear” and “Extreme Fear” zones reflect investor expectations of further price deterioration.

For bitcoin bulls, the Index will need to move back through to 46/100 to bring April’s high of $47,433 into play.

Bitcoin correlation with the NASDAQ 100 decouples

The correlation between bitcoin and the NASDAQ 100 strengthened in April. In early May, however, the correlation weakened following Tuesday’s divergence.

A further decoupling may be unlikely near-term, with the NASDAQ and BTC likely to be sensitive to the Federal Reserve monetary policy decision later today.

In 2022, there has been little evidence of investors using BTC as an inflation hedge or as a safe haven.

Year to date, BTC was down 21.0% to Tuesday’s close, with the NASDAQ down 20.7%.

Bitcoin price action

At the time of writing, bitcoin was up by 0.01% to $37,730.

Technical indicators

Bitcoin will need to move through the day’s $37,959 pivot to target the First Major Resistance Level at $38,405. Bitcoin would need broader market support to return to $38,000.

In the event of an extended rally, bitcoin could test the Second Major Resistance Level at $39,079. The Third Major Resistance Level sits at $40,206.

Failure to move through the pivot would bring the First Major Support Level at $37,280 into play. Barring another extended sell-off, bitcoin should avoid sub-$36,000. The Second Major Support Level at $36,831 should limit the downside.

Looking at the EMAs and the four-hourly candlestick chart (below), it is a bearish signal. Bitcoin sits below the 50-day EMA, currently at $38,793. This morning, we saw the 50-day EMA pull back from the 100-day EMA, delivering downside pressure. The 100-day EMA also pulled back from the 200-day EMA, BTC negative.

A move through the 50-day EMA would support a look at $39,000.