BTC Fear & Greed Index Returns to Neutral on Regulatory Scrutiny

Key Insights:

• It was a bullish Friday, with BTC rising by 0.27% to end the day at $23,067.
• US economic indicators and the NASDAQ Index provided support, while regulatory chatter tested investor appetite.
• The Fear & Greed Index returned to the Neutral zone, falling from 55/100 to 52/100.

On Friday, bitcoin (BTC) rose by 0.27%. Reversing a 0.22% loss from Thursday, BTC ended the day at $23,067. Notably, BTC held onto the $23,000 handle for the third time since August 18.

A bearish start to the day saw BTC slide to an early low of $22,533. BTC fell through the First Major Support Level (S1) at $22,814 and briefly through the Second Major Resistance Level (S2) at $22,623.

However, finding afternoon support, BTC struck a late high of $23,486. BTC briefly broke through the First Major Resistance Level (R1) at $23,234 and the Second Major Resistance Level (R2) at $23,463 before easing back to end the session at $23,067.

US Inflation and US Regulatory Chatter Deliver a Choppy BTC Session

It was another busy day on the US economic calendar, with inflation and personal spending in focus. The numbers for December supported a 25-basis point Fed interest rate hike next week, with inflation softening and personal spending falling for the second consecutive month.

The Core PCE Price Index increased by 4.4% year-over-year in December versus 4.7% in November. Personal spending fell by 0.2% in December, following a 0.1% decline in November, while personal income rose by 0.2%.

In response to the numbers, the NASDAQ Composite Index rose by 0.95% as the latest stats cemented a 25-basis point Fed interest rate hike next week.

However, cryptocurrency scrutiny tested investor sentiment. The White House called for Congress to push for more robust crypto regulations, with the SEC investigating investment advisers for possible breaches of crypto-related custody rules.

Scrutiny from the White House was inevitable following the Thursday release of a 116-page FTX creditor list. While FTX cash & cash equivalents and non-strategic assets may make creditors whole, the list delivered investors a reality check, with Apple Inc (AAPL) among the long list of creditors.

On Thursday, we discussed the likelihood of the list giving US lawmakers and regulators reasons to introduce tight regulatory controls to limit the impact of the crypto market on corporate America and more traditional asset classes.

The Day Ahead: Crypto Market News Wires to Guide Investors

Today, investors should continue to monitor the crypto news wires. FTX and Genesis bankruptcy proceedings and crypto regulatory chatter will need consideration.

The Fear & Greed Index Returns to Neutral after Brief Greed

This morning, the BTC Fear & Greed Index fell from 55/100 to 52/100. Despite a bullish BTC session, the Index returned to the Neutral zone after a brief visit to the Greed zone on Thursday for the first time since March 2022.

Increased regulatory scrutiny likely contributed to the Index decline, while US economic indicators and sentiment toward Fed monetary policy limited the downside.

The latest move signals a possible delay to a BTC return to $25,000.

Near-term, the Index needs to return to the Greed zone (55/100) 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 0.06% to $23,081. A range-bound start to the day saw BTC fall to an early low of $23,043 before finding support.

Technical Indicators

BTC needs to avoid a fall through the $23,029 pivot to target the First Major Resistance Level (R1) at $23,524. A move through the Friday high of $23,486 would support a bullish session. However, the crypto news wires should be market-friendly to deliver a breakout.

In the event of another extended rally, BTC would likely test the Second Major Resistance Level (R2) at $23,982 and resistance at $24,000. The Third Major Resistance Level (R3) sits at $24,935.

A fall through the pivot would bring the First Major Support Level (S1) at $22,571 into play. However, barring a broad-based crypto sell-off, BTC should avoid sub-$22,500 and the Second Major Support Level (S2) at $22,076. The Third Major Support Level (S3) sits at $21,123.

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 $22,483. The 50-day EMA pulled further away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($22,571) and the 50-day EMA ($22,483) would support a breakout from R1 ($23,524) to target R2 ($23,982) and $24,000. However, a fall through S1 ($22,571) and the 50-day EMA ($22,483) would give the bears a run at S2 ($22,076). A fall through the 50-day EMA would send a bearish signal.