Bitcoin Has Reached Key Level of Support with Extreme Levels of Fear Across the Market

GB Market Commentary 10/01/2022

by Marcus Sotiriou

Bitcoin continued its downtrend over the weekend as it reached a key level of support at $40,700, which acted as multiple areas of importance in 2021. Even though it has had a weak reaction so far, I expect upside in the short term to the mid $40k region, due to the interaction with such a significant level, whilst reaching oversold on the daily RSI. Fear reached 10 on the Crypto Fear and Greed Index on Saturday, which is the lowest since the crypto market bottomed on 21st July before a rally of over 100%, adding further confluence that a relief rally at the least is expected in the short term.

Mike Novogratz, CEO of Galaxy Digital, agrees with this idea, as he expects the price of bitcoin to bottom at around $38K-$40K. He claimed “I know big institutions who are going through their process to put positions on. They’re going to see those as attractive levels to buy.” This is no surprise as we know institutions tend to enter positions at the start of the year.

Will the global market have an impact on Bitcoin’s price over the coming days/weeks?

Despite the crypto market being in oversold territory, it is widely impacted by global markets and economic conditions. Plans declared by the Federal Reserve for rate hikes in 2022, as well as reducing the rate of monthly bond purchases, have contributed to Bitcoin’s sell off so far.

On Wednesday, US inflation data will be released. The market expects the consumer price index (CPI) to rise 7.1% for the year through December and 0.4% over the month. If the figure released is larger than expected we can expect further sell pressure for Bitcoin, as the markets are forward-looking and high inflation leads to more action from the Federal Reserve to control it. I think due to the selling we have seen in recent weeks, the downside is limited in the short term, even with higher-than-expected inflation data on Wednesday.