Milan, Italy - August 10, 2017: China Evergrande Group logo on the website homepage.

Bitcoin price prediction as the fear and greed index falls

The Bitcoin price crashed by more than 9% as global risks accelerated. The BTC coin declined to an intraday low of $43,500, which was the lowest level since August 7th. This drop brought its total market capitalization to more than $858 billion. 

Bitcoin and VIX index

The Bitcoin price declined sharply as risks in the market increased. The CBOE volatility index, which is the favourite gauge for volatility and fear rose to the highest level since May in a sign that investors are afraid about the current market conditions. 

At the same time, the fear and greed index, which is a gauge created by CNN Money, declined to 34, signalling that investors are getting fearful. 

There are several reasons why investors are afraid about the market. First, there is the risk of Evergrande, the giant Chinese real estate company that has more than $306 billion in debt. The company has some debt maturities scheduled for Monday and Thursday this week.

Therefore, if it can’t make these payments, the company risks being the biggest company to go bankrupt since the last Global Financial Crisis (GFC). As a result, there are risks of contagion, whereby other local and international real estate and banking companies face significant challenges. 

Second, investors are worried about the US debt ceiling. Congress facing a deadline to raise the debt ceiling. A normal procedure to raise the country’s debt ceiling will need 60 Senate votes, meaning that Joe Biden faces a tough period to do so. 

Without such a deal, the country’s funding will expire, leading to the country defaulting on its obligations. In an opinion in the Wall Street Journal, Janet Yellen wrote:

“Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency. Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil.”

Third, the Bitcoin price is falling ahead of the Federal Reserve interest rate decision scheduled for Wednesday this week. In it, the bank is expected to leave interest rates unchanged and provide hints about tapering of asset purchases. Finally, there are concerns about regulations of stablecoins

Bitcoin price forecast

Bitcoin Price

The daily chart shows that the BTC price has been under intense pressure in the past few weeks. After rising to more than $52,000 this month, the token has crashed by more than 17%. It remains slightly below the 50-day moving average but it is still being supported by the 100-day and 200-day MAs. 

The Relative Strength Index (RSI) has formed a bearish divergence pattern. Therefore, there is a likelihood that the coin will keep pushing lower as investors target the key support at $40,000.