Bitcoin (BTC) Sinks to sub-$40,000 Amidst Heightened Risk Aversion

Key Insights:

• Bitcoin (BTC) slides back to sub-$39,000 before finding support.
• Government focus on cryptos and broader market risk aversion hit the crypto market.
• Bitcoin’s brush with safe-haven status was brief as crypto policy uncertainty returns

It was a particularly bearish day for Bitcoin (BTC) on Friday. Bitcoin briefly moved into positive territory before hitting reverse. In the early hours, Bitcoin rose to a day high of $42,521 before sliding to a late low of $38,621. A late move back through to $39,000 levels limited the damage.

Following a 3.33% fall on Thursday, Bitcoin tumbled by 7.82% to end the day at $39,154.

It was also a bearish session for the rest of the crypto top 10.

BNB (-7.05%), ETH (-7.43%), LUNA (-7.78%), SOL (-7.61%) led the way down, with ADA (-6.32%) and XRP (-5.31%) also struggling.

AVAX (-3.59%) saw a relatively modest loss on the day.

Bitcoin Fear & Greed Index Hits Reverse

After briefly returning to the “Neutral” zone, the Bitcoin Fear & Greed Index continued to slide this morning. The index fell from a Thursday 39/100 to 22/100 in response to Bitcoin’s 3^rd consecutive day in the red on Friday and a bearish start to Saturday. The reversal saw the index return to the “Extreme Fear” zone.

For the Bitcoin bulls, the index will need to move back through to 54/100 to bring $50,000 levels back into play for Bitcoin. A fall to sub-20/100 would deliver sub-$30,000 levels.

After decoupling from the NASDAQ 100 and other riskier assets earlier in the week, Bitcoin struggled on Friday. Greater government scrutiny over crypto exchanges added further pressure on the crypto market.

In response to Russia’s capture of Europe’s largest nuclear plant, the European equity markets saw deep red, with the CAC40 and the DAX tumbling by 4.97% and 4.41%, respectively. NASDAQ 100 fell by 1.66%, while the U.S. Dollar Spot Index climbed by 0.62% to 98.648. Gold Spot ended the day up by 1.79% to $1,970.70.

Bitcoin Price Action

At the time of writing, Bitcoin was down by 0.75% to $38,860.

Technical Indicators

Bitcoin will need to move through the $41,000 pivot to make a run on the First Major Resistance Level at $41,569. Bitcoin would need broader market support to break back through to $40,000.

In the event of another extended rally, Bitcoin could test resistance at $42,000. The Second Major Resistance Level sits at $43,997.

Failure to move through the pivot would bring the First Major Support Level at $37,678 into play. Barring another extended sell-off throughout the day, Bitcoin should avoid the Second Major Support Level at $36,194.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. Bitcoin sits below the 100-day EMA. The 50-day EMA has narrowed to the 200-day, with the 100-day EMA pulling back from the 200-day EMA. A bearish cross of the 50-day EMA through the 200-day EMA would bring the Major Support levels into play.

A move through the 100-day EMA, currently at $40,800, would provide support.