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BTC Fear & Greed Index Hits Neutral on a Fed Fear-Fueled Sell-Off

By:
Bob Mason
Updated: Jan 31, 2023, 11:57 GMT+00:00

BTC wrapped up Monday at sub-$23,000 for the first time in six sessions, with Fed Fear sending the NASDAQ Index and the crypto market into the red.

BTC technical analysis - FX Empire

In this article:

Key Insights:

  • It was a bearish Monday, with BTC sliding by 3.86% to end the day at $22,830.
  • The crypto news wires failed to influence investor sentiment, with Fed fear and the NASDAQ Index sending BTC into negative territory.
  • The Fear & Greed Index responded to the bearish session, falling from 61/100 to 51/100.

On Monday, bitcoin (BTC) slid by 3.86%. Reversing a 3.11% rally from Sunday, BTC ended the day at $22,830. BTC wrapped up the day at sub-$23,000 for the first time in six sessions.

A mixed start to the day saw BTC rise to an early high of $23,785 before hitting reverse. Coming up short of the First Major Resistance Level (R1) at $24,139, BTC slid to a late low of $22,500. BTC slid through the First Major Support Level (S1) at $23,177 and briefly through the Second Major Support Level at $22,607 before ending the day at $22,830.

Fed Fear Sent the NASDAQ Index and BTC Deep into the Red

Investor sentiment toward the Fed turned sour on Monday. With no US economic indicators to consider, fears of a hawkish Fed Chair Powell press conference sent the NASDAQ Index into negative territory.

Uncertainty towards tech giant earnings results and outlooks also tested investor resilience at the start of the week. Apple (AAPL), Amazon.com (AMZN), and Alphabet Inc. (GOOGL) will release results this week. A hawkish Fed and gloomy outlooks would be a bearish combination.

The crypto news wires and FTX updates took a backseat, with BTC recoupling with the NASDAQ ahead of tomorrow’s Fed interest rate decision and press conference.

While investors are betting on a 25-basis point interest rate hike on Wednesday, Fed Chair Powell could deliver a hawkish press conference. The US unemployment rate sits at 3.5%, well below the Fed’s 5% mandate, which gives the Fed the scope to push higher for longer.

Today, US economic indicators will draw interest, with consumer confidence in the spotlight. A pickup in consumer confidence could add further pressure on riskier assets ahead of tomorrow’s labor market numbers and Fed policy decision.

Investors should also monitor the crypto news wires. SEC v Ripple, FTX, and Genesis updates need consideration, along with chatter from US lawmakers and regulators.

NASDAQ correlation.
NASDAQ – BTCUSD 310123 Daily Chart

The Fear & Greed Index Slides to Neutral on Fed Fear

Today, the BTC Fear & Greed Index slid from 61/100 to 51/100. Fed Fear gripped the global financial markets on Monday, sending the NASDAQ Index and BTC deep into negative territory.

The Index responded with a return to the Neutral zone. However, the Index avoided a fall into the Fear zone. While easing contagion risk remains a crypto tailwind, a hawkish Fed and early cracks in the US economy could signal a hard landing.

Near-term, the Index has to avoid the Fear zone to support a BTC recovery. A fall into the Fear zone would signal a near-term bullish trend reversal.

Fear & Greed Index returns to neutral.
Fear & Greed 310123

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.31% to $22,750. A mixed start to the day saw BTC rise to an early high of $22,854 before falling to a low of $22,730.

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Technical Indicators

BTC needs to move through the $23,038 pivot to target the First Major Resistance Level (R1) at $23,577 and the Monday high of $23,785. A return to $23,500 would signal a breakout session. However, the crypto news wires and the NASDAQ Index need to provide support.

In the event of another bullish session, the bulls would likely test the Second Major Resistance Level (R2) at $24,323. The Third Major Resistance Level sits at $25,608.

Failure to move through the pivot would leave the First Major Support Level (S1) at $22,292 in play. However, barring another broad-based crypto sell-off, BTC should avoid sub-$21,500. The Second Major Support Level (S2) at $21,753 should limit the downside. The Third Major Support Level (S3) sits at $20,468.

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Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bullish signal. BTC sat above the 100-day EMA, currently at $21,988. The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A move through the 50-day EMA ($22,860) would support a breakout from R1 ($23,577) to target R2 ($24,323). However, a fall through S1 ($22,292) would give the bears a run at the 100-day EMA ($21,988) and S2 ($21,753). A move through the 50-day EMA would send a bullish signal.

Chart, line chart Description automatically generated

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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