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Bitcoin Price Prediction as Fear and Greed Index Slumps

Bitcoin Price Prediction as Fear and Greed Index Slumps

Last updated 11th Aug 2022
Disclosure
  • Bitcoin price crashed hard as fear spread across the financial market.
  • Investors are fearful about the rising interest rates and recession risks.

Bitcoin price crashed below the key support level of $20,000 as the fear and greed index tumbled to 23. The BTC coin is trading at $19,000, which was the lowest level since June 19th. Its market cap has crashed to $364 billion, meaning that investors have lost more than $700 billion in the past few months.

Fear and greed index

Bitcoin price is crashing as investors price in a major recession in the coming months as the Federal Reserve embraces a more hawkish tone.

The Fed has already hiked interest rates by 150 basis points in a bid to fight inflation. In a statement on Wednesday, the Fed Chair said that the bank will continue with this trend for a while. He reiterated that the bank’s policies will likely cause a recession.

As a result, investors have gotten extremely fearful and moved away from risky assets. For example, the closely-watched fear and greed index has crashed to 25, which is an extreme fear level.

Most parts of the index like market momentum, McClellan Volume Summation, safe haven, and junk bond demand have moved to extreme fear. The CBOE VIX index has also jumped by more than 10% today.

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At the same time, American equities have slumped, with the Dow Jones. S&P 500, and Nasdaq 100 futures fell by more than 1%. The US dollar, which has become a safe haven has jumped to $105.

Bitcoin and American indices have had a strong correlation in the past few months. This price action is a reflection that Bitcoin is neither a hedge against inflation nor a safe haven.

BTC price is also crashing after a judge ordered the liquidation of Three Arrows Capital, a hedge fund that had over $10 billion in assets. The SEC also decided to reject a Bitcoin spot ETF.

How low can Bitcoin price go?

The four-hour chart shows that the BTC price has formed a rounded top pattern that is shown in black. Now, the coin managed to move below the lower side of this pattern. It also managed to move below the 25-day and 50-day moving averages. Most importantly, it moved below the important psychological level of $20,000.

Therefore, in my view, we have not had enough buyers above the resistance level at $21,888. As such, there is a likelihood that the coin will drop to a low of $17,616, which was the lowest level this year. A move below that level will then bring the psychological point at $15,000 to view.

Crispus Nyaga

Crispus Nyaga

Crispus is a financial analyst with over 9 years in the industry. He covers cryptocurrencies, forex, equities, and commodities for some of the leading brands. He is also a passionate trader who operates his family account. Crispus lives in Nairobi with his wife and son.