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Neverending Nightmare Fear Cycle In Crypto Breaks, What Happens Now?

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The crypto market is moving higher as Bitcoin, Ethereum and other larger cryptocurrencies turn critical resistance points into support. The price of ETH is currently leading a market recovery as it has recorded a 40% gain over the past seven days, trading at $1,500.

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

Ethereum ETHUSDT Cryptocurrency
ETH price with a slight increase on the 4-hour chart. Source: ETHUSDT TradingView
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As a result of bullish momentum, the Fear Greed Index broke its 74-day streak to extreme levels of fear, according to a report from Arcane Research. Again, this confirms the profitability of going long when this index consolidates around these levels.

As you can see in the chart below, the Crypto Fear and Greed Index has returned to its Q1 2022 levels. That figure plummeted in May as the price of bitcoin breached the $30,000 barrier to hit a multi-year low at around $17,500.

Source: Secret Research.

Despite the current bullish momentum, the index is still gravitating towards fear territory, suggesting that BTC, ETH, and the crypto market will need to follow the index and recover their prices in the first quarter of 2022 before other market participants become more optimistic. Arcane Research noted the following:

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

The chart above shows that the sector is at a tipping point as the Crypto Fear and Greed Index climbed above 30. A break above these levels could confirm a change in the current market trend.

Why the Cryptocurrency Market May Take Advantage of This Window of Opportunity

In the short term, the crypto market has a chance to extend the bullish momentum. The factors pushing BTC and ETH to yearly lows seem to be easing.

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

Inflation, as measured by the consumer price index (CPI), looks set to slow down. That figure has risen in 40 years, but could take a step back as oil, copper and other commodities trend downwards, according to NewsBTC. The printing of the CPI is highly dependent on commodity prices.

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The cryptocurrency market also seems to be getting support from traditional stocks. The two sectors have been correlated since the start of the downtrend and thus BTC and other cryptocurrencies could benefit from a bounce in stocks to previous levels.

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