Neverending Fear Cycle In Crypto Breaks, What Happens Now?

The crypto market is rising as Bitcoin, Ethereum and other larger cryptocurrencies turn critical resistance points into support. ETH price is currently leading the market recovery as it recorded a 40% profit in the past seven days when trading $1,500.

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On the other hand, the price of BTC is more conservative but is starting to record significant gains. At the time of writing, BTC is trading at $22,800 with a gain of 14% over the same period and is on track to lock in further gains.

Crypto Ethereum ETHUSDT
ETH price with slight gains on the 4 hour chart. source: ETHUSDT TradingView

As a result of the bullish momentum, the Fear and Greed Index exited from the 74-day line and moved to the extreme fear levels, according to a report by Arcane Research. Once again, this confirms the profitability of entering long positions when this indicator consolidates around those levels.

As shown in the chart below, the Crypto Fear and Greed Index returned to its levels in the first quarter of 2022. This index fell in May when the price of Bitcoin broke below the $30,000 mark and reached a multi-year low of $17,500.

Source: Arcane Research

Despite the current bullish momentum, the index is still drawn into the fear zone pointing to BTC and ETH and the cryptocurrency market will need to follow the index and recover its prices for the first quarter of 2022 before more market participants become more bullish. Arcane Research notes the following:

While sentiment is improving, the Fear and Greed Index remains deep in fearful territory, and other viable sentiment indicators from the derivatives market suggest that market participants remain cautious.

The above chart indicates that the sector is at a turning point as it surged above 30 in the Crypto Fear and Greed Indicator. A break above these levels could confirm a change in the current market trend.

Why the crypto market can seize this opportunity

In the short term, the cryptocurrency market has an opportunity to expand its bullish momentum. The factors that are pushing BTC and ETH to annual lows appear to be mitigating the blow.

These include the US Federal Reserve’s (Fed) attempt to stem inflation by raising interest rates. The financial institution has entered a hiatus, which means that its representatives will not make public statements until the next meeting of the Federal Open Market Committee (FOMC).

Inflation, according to the Consumer Price Index (CPI), appears to be on the cusp of slowing. As reported by NewsBTC, this metric has seen a 40-year high but may take a step back as Oil, Copper, etc. head to the downside. The printing of the CPI is highly dependent on the prices of goods.

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The cryptocurrency market also appears to be receiving support from traditional stocks. These two sectors have been linked since the beginning of the downtrend, so BTC and other cryptocurrencies may benefit from the stock rebound to previous levels.

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