Bitcoin enters a consolidation pattern, but "there is extreme fear"
The cryptocurrency market is no stranger to the selling panic unleashed in the main European markets on Monday, after the total cut of gas supply by the Nord Stream 1 pipeline, that Russia decreed last Friday. Both bitcoin and the rest of cryptographic tokens are in the red. The largest coin by market capitalization temained depressed for most of the weekend, below $20,000, while sentiment is "extreme fear" in the market.
The weekly chart showed a substantial rejection of the $24,000 resistance level, which pushed the price into the $20,000 area. "Breaking through its 200-week average, BTC appears to be struggling to hold support levels on lower time frames. For now, it is moving within the consolidation pattern in the $19,150 and $24,000 range," noted Alejandro Zala, Bitpanda's country manager in Spain.
On the daily chart, "Bitcoin´s price continues its consolidation below the $20,000 area and is struggling to gain pace above resistance. On the downside, an initial support is near the $19,150 level, while the main upside hurdle is near the $20,600 level," the expert added.
Prices move below the 100-hour simple moving average. Meanwhile, the important 200-day trend line continues to move steadily lower, representing a bearish trend.
"The Fear and Greed Index stands at 20 points; extreme fear is back," Zala explained. The recent drop in overall market prices also dragged down sentiment on the Fear and Greed Index, as it is back at extreme fear levels. With 20 points on the scale, bearish people seem convinced that the market will continue to decline. The index is down 5 points from last week and 27 points from its August peak.
FEAR AND UNCERTAINTY FOR MT. GOX
On the other hand, the upcoming release of the 137,000 Bitcoins released following the resolution of the Mt. Gox crypto-bankruptcy litigation "caused a lot of fear in the markets," commented Lark Davis, analyst at The Wealth Mastery, "with a lot of misinformation usually accompanying that fear."
The expert spoke of a great deal of FUD ('fear, uncertainty and doubt') sentiment surrounding this event. "The whole process of rehabilitating the Mt. Gox funds has been slow and opaque," Davis stated, "but the fact is that these Bitcoins will start to find their way into the market soon, but slowly. Not all at once."
The fears are that it will result in an overwhelming amount of Bitcoins coming to market and drive further selling pressure on the leading digital asset at an already difficult time.
"There's no indication of how many people will sell, but some will sell considering they have about 4,000% upside," Davis commented. "Most likely the Gox sell-off will be slow, providing continued pressure. Hopefully it will be low enough that the impact on the market won't be super dramatic," he added, but stressed that "this fear could be enough to drive the markets. We are in very precarious times.