Bitcoin (BTC) sentiment is seeing its first significant test of the rally to yearly highs as bullish gains dry up.
The start of trading on Wall Street on March 30 did not result in a rebound in BTC/USD, which was threatening to lose support at $47,000.
From “extreme fear” to “greed” in one week
Having rallied nearly 30% since March 14, Bitcoin has managed to hold onto its annual opening price as support, which previously marked the upper resistance level of its trading range for all of 2022.
Now, however, hopes for a retracement appear to be coming true as momentum is showing signs of – at least temporary – fatigue.
Data from Cointelegraph Markets Pro and TradingView captured the overnight reversal on March 30, with $48,000 currently proving to be a tough level for bulls to break.
BTC/USD 1 Hour Candlestick Chart (Bitstamp). Source: TradingView
Traders are keenly watching the possibility of a support backtest but remain divided on how low would be “too low” and end up threatening the overall uptrend.
Popular trader Crypto Ed highlighted $45,000 as a core bounce zone in the event of a broader pullback, but below the all-important yearly open at $46,200.
Fail there and move towards $40,000, hey added in his last YouTube update, was something he “doubted”.
However, looking at the sentiment gauge of the Crypto Fear & Greed Index, the need for a timeout becomes all the more apparent. In less than a week, his normalized score went from 22/100 – “extreme fear” – to 60/100 – “greed” and the highest level since mid-November.
Since the local peak, the score has already started falling towards “neutral” territory, standing at 56/100 on March 30th.
Crypto Fear & Greed Index (Screenshot). Source: Alternative.me
Inflation nightmare scenario is playing out
Analysis of the mood problem, social media users referenced Macro forces at work traditionally spelling trouble for risky assets to argue that enthusiasm for Bitcoin was overheated.
Related: Bitcoin hits 3-day low as Terra BTC buy-ins fall below $48,000
The highest inflation in 40 years and near-zero interest rates hardly provide a fertile risk environment, they argued.
However, a look at the gold markets could show that the trend is going nowhere, despite central bank measures to dampen inflation.
Material Scientist, creator of on-chain analysis resource Material Indicators, noted that gold futures deliveries followed the “dysfunctional” path previously forecast by ex-BitMEX CEO Arthur Hayes.
Hayes had warned that gold would soar once saving in the major fiat currencies turned out to be a lame bet.
Hayes spoke about this in his recent article https://t.co/khsadQuEGK
— Materials Scientist (@Mtrl_Scientist) March 30, 2022
In the same article, Hayes said that Bitcoin would ultimately benefit from the chaos by decoupling from traditional stocks.
“Gold price >$10,000 will psychologically shock global asset markets. With global asset allocators now thinking primarily of inflation and real returns, all hard monetary assets thought to protect portfolios from this plague will soar to astronomical levels,” he wrote.
“And that’s the mental shift that’s breaking bitcoin’s correlation with traditional risk on/off assets like US stocks and nominal interest rates.”