The Bitcoin price is in a difficult place after last week’s relief rally fades. BTC is trading at $41,840, which is about 40% below its all-time high. It has dropped by about 15% this year and underperformed stocks and other assets like copper and crude oil.
Fear and greed index slipping
The ongoing crash of Bitcoin prices has coincided with a period when investors are getting fearful about the market.
The closely-watched cryptocurrency fear and greed index has declined to a low of 24, which is a sign that there is extreme fear in the market. At the same time last week, the index was slightly lower than that at about 21.
Notably, the crypto fear and greed index has diverged with the CNN Money index that focuses on stocks. That fear and greed index is currently at 57, meaning that stock investors are getting greedy. The index was at the neutral level of 53 at the same time last month.
Analysts point the rising fear in the market to the Federal Reserve. In the past few months, the bank has hinted that it is about to shut down its printing presses. It will achieve that by initially ending quantitative easing in March and then starting hiking interest rates gradually.
Risky assets tend to underperform in a period when the Fed is tightening rates. In financial lingo, this is known as not fighting the Federal Reserve.
The situation explains why the tech-heavy Nasdaq 100 index has underperformed other indices like Dow Jones and S&P 500. It also explains why, as I wrote on Monday, the prices of metaverse projects like The Sandbox and Decentraland have crashed.
Still, there is a catalyst that could push the Bitcoin price higher. The Fed has hinted that its analysis on Bitcoin and other digital currencies is ready. Therefore, the regulatory clarity will bring more institutional investors to digital currencies.
Bitcoin price prediction
The daily chart shows that the BTC price has been in a strong bearish trend. A closer look also confirms that last week’s rebound was a part of a relief rally. The coin remains below the 25-day and 50-day moving averages. It has also moved below the 61.8% Fibonacci retracement level.
Therefore, there is a likelihood that the Bitcoin price will keep falling as bears target the next key support at $40,000. A move below that level will open the possibility of a drop to $35,000.
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