BTC Fear & Greed Index Finds Powell Support to Signal $25,000

Key Insights:

• It was a bullish Wednesday, with BTC rising by 2.54% to end the day at $23,723.
• US economic indicators took a backseat, with Fed Chair Powell delivering a late NASDAQ Index and broader crypto market rally,
• The Fear & Greed Index responded to the bullish session, rising from 56/100 to 60/100.

On Wednesday, bitcoin (BTC) rose by 2.54%. Following a 1.34% gain on Tuesday, BTC ended the day at $23,723. Despite the bullish session, BTC failed to strike a new 2023 high.

After a range-bound morning, BTC slid to a pre-Fed Chair Powell press conference low of $22,757. BTC fell through the First Major Support Level (S1) at $22,811 before surging to a late high of $23,814. BTC broke through the First Major Resistance Level (R1) at $23,378 and the Second Major Resistance Level (R2) at $23,621 to end the day at $23,723.

Fed Chair Powell Delivers a Breakout with a Market-Friendly Outlook

It was a busy Wednesday session, with US economic indicators and the Fed in focus. Disappointing US stats sent BTC and the broader crypto market to session lows.

According to the ADP, nonfarm employment increased by 106k in January versus a forecasted 178k rise. The ISM Manufacturing PMI also disappointed, falling from 48.4 to 47.4. While JOLTs job openings impressed, rising from 10.440 million to 11.012 million in December, the numbers were for December.

Late in the session, the Fed delivered its first interest rate decision of the year, raising rates by 25 basis points. Investors showed a muted reaction to the hike, leaving Fed Chair Powell to move the dial.

Powell stated that the Fed could deliver a few more rate hikes to bring inflation to target while acknowledging that the disinflationary process has started. The Fed Chair also said that the Fed Funds Rate could stay below 5% and deliver the inflation target without a ‘significant downturn, or a really significant increase in unemployment.’

The crypto market-friendly press conference drove demand for riskier assets, with the NASDAQ Index rallying by 2.00%.

Today, we expect more reaction to the Fed Chair Powell press conference ahead of the US session. Later in the day, US economic indicators will draw interest. Following the weak ADP numbers on Wednesday, initial jobless claims will influence market risk appetite. Unit labor costs, factory orders, and core durable goods order numbers will also draw interest.

Investors need to continue monitoring the crypto news wires. Updates from FTX and Genesis bankruptcy proceedings and rulings from the SEC v Ripple case will provide direction. However, regulatory chatter will also influence.

The Fear & Greed Index Reflects Sentiment Toward the Fed

Today, the BTC Fear & Greed Index rose from 56/100 to 60/100. US economic indicators failed to influence, with the Fed Chair Powell press conference raising hopes of the US avoiding a recession. A less aggressive interest rate trajectory was the key, with Powell hoping to leave rates below 5%.

Easing FTX and Genesis contagion risk and a less hawkish Fed leaves investors to grapple with regulatory risk. The collapse of FTX has led to increased scrutiny, leaving a high degree of uncertainty for investors to consider.

Near-term, the Index has to avoid the Neutral zone to support a BTC run at $25,000. A fall into the Fear zone would signal a near-term bullish trend reversal.

Bitcoin (BTC) Price Action

At the time of writing, BTC was up 1.59% to $24,100. A mixed start to the day saw BTC fall to an early low of $23,695 before striking a high of $24,171. BTC tested the First Major Resistance Level (R1) at $24,106 early as investors responded further to the Powell press conference.

Technical Indicators

BTC needs to avoid a fall through the $23,431 pivot to break out from the First Major Resistance Level (R1) at $24,106 and target the Second Major Resistance Level (R2) at $24,488. A move through the morning high of $24,171 would signal another bullish session. However, US economic indicators and the NASDAQ Index need to provide support.

In the event of another bullish session, the bulls would likely test resistance at $25,000. The Third Major Resistance Level sits at $25,545.

A fall through the pivot would bring the First Major Support Level (S1) at $23,049 into play. However, barring a risk-off-fueled crypto sell-off, BTC should avoid sub-$23,000 and the Second Major Support Level (S2) at $22,374. The Third Major Support Level (S3) sits at $21,317.

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 $23,017. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($23,049) and the 50-day EMA ($23,017) would support a breakout from R1 ($24,106) to target R2 ($24,488) and $25,000. However, a fall through S1 ($23,049) and the 50-day EMA ($23,017) would give the bears a run at S2 ($22,374). A fall through the 50-day EMA would send a bearish signal.