Bitcoin Regains $40K As Sentiment Turns to Extreme Fear

Crypto markets continued a second day of slide on Friday as bitcoin hovered above pivotal support at $40,000 in European hours, data show.

Bitcoin bounced to $40,100 early Friday, after losing 2.9% Thursday. Some analysts are still bullish on the future prices of the world’s largest cryptocurrency. Bitcoin is trading near the $40,000 support level, which runs through the lows of the first three months of the year. Current price action is, however, a sign of alarm among some traders.

A formal signal to break the support will be considered a failure under the previous lows in the $38,000 area. The ability to develop a reversal to the offensive from these levels, on the contrary, will reinforce the importance of this moderate uptrend line.

The Crypto Fear and Greed Index, a popular sentiment indicator and there is extreme fear among crypto investors on Friday, with a reading at 22. That’s down from last week’s “fear” reading of 37.

The index generates a single number, between 1 and 100, with 1 indicating that the crypto market is in a state of extreme fear (meaning people are selling,) while on the other end of the spectrum, 100 indicates that the market is undergoing an extreme level of greed (meaning people are buying).

Bitcoin sold off hard during Q4, but then during the first frame of 2022, it underwent a period of relatively directionless trading. Contracting price action over the last three months could continue to make things even choppier in the near term, but given the nature of volatility (expanding/contracting) and the fact that this is bitcoin, volatility is likely to ramp up again as we head towards the middle of the year.