Crypto Fear and Greed Index Hits Extreme Fear as Bitcoin Slides, Will Bitcoin Hold the $84,000 Support Level?
The brief recovery in the cryptocurrency market has hit a wall of resistance. Bitcoin managed to claw back some losses by Monday evening but the digital asset remains significantly below the psychological $90,000 threshold. The price slipped 5.2% over the last 24 hours to hover around $86,447. This price action signals that the path of least resistance remains downward as bears tighten their grip on the market.
The primary culprit for this sudden downturn is coming from the other side of the world. The Bank of Japan has sent a clear signal that an interest rate hike is imminent. This sounds like boring financial plumbing but it is actually the heartbeat of global speculation. For decades investors have borrowed Japanese Yen at rock bottom interest rates to buy riskier assets like crypto. This is known as the "carry trade." When the Bank of Japan raises rates it makes those loans more expensive. Investors are forced to sell their Bitcoin to pay back their Yen debts.
Mizuho analyst Daniel O’Regan noted that the Yen carry trade has been the liquidity supplier of choice for years. That spigot is now being turned off. This liquidity shock is hitting a market that is already nervous. The "Crypto Fear and Greed Index" has plunged to a score of 20 out of 100. This places the market firmly in "Extreme Fear" territory. This metric combines volatility and social media sentiment to gauge the emotional temperature of traders. Right now that temperature is freezing.
Technical analysis paints a gloomy picture for the short term. Research from Investtech indicates that Bitcoin has established a falling trend channel. This suggests increasing pessimism among large investors. The next major line of defense sits at the $84,000 mark. If Bitcoin falls through that floor there is very little structural support to prevent a drop toward $80,000.
The broader macroeconomic calendar is not helping matters either. Traders are anxiously waiting to see if the US Federal Reserve will cut interest rates in December. A cut would usually boost liquidity and help assets like Bitcoin. However the threat of a Japanese rate hike is currently overshadowing hopes for American stimulus. History is also not on the side of the bulls. Data from Dow Jones Market Data shows that Bitcoin has risen between Black Friday and New Year’s Eve in only 54% of cases since 2014.
The pain is spreading well beyond Bitcoin. Ethereum lost 7.6% to trade near $2,792. Smaller and more volatile tokens are taking even heavier hits. Solana slipped 8% and the popular memecoin Dogecoin retreated nearly 9.4%. The correlation between these assets remains high which means a further drop in Bitcoin will likely drag the entire altcoin market down with it.