Increased Greed Ahead of the FOMC: Is Bitcoin Facing Another Sentiment Challenge?

As the FOMC meeting approaches, retail investors are aggressively bidding on Bitcoin. But is this surge in greed a potential trap?

Key Takeaways

Bitcoin's trading range hovered between $92,700 and $93,000, remaining slightly bullish.
A significant supply zone at $94,000 raised concerns as buyers faced repeated rejections.
Retail interest surged, but historically, strong FOMO often leads to corrections.
The bearish RSI divergence indicates weakening momentum, despite ongoing buying activity.
A breakthrough past the $96,500 resistance could have paved the way to a $100,000 target.

Bitcoin BTC

Bitcoin's Current Performance

Bitcoin [BTC] fluctuated between $92,700 and $93,000 during the trading session, maintaining its position above the 4-hour EMA Ribbon. This slight bullish trend indicates positive short-term sentiment. However, frequent rejections near the $94,000 mark reveal a struggle among buyers to assert control in this critical supply zone.

Bitcoin Trading View Chart Source: TradingView

This supply zone acts as a pivotal point for market direction. A definitive break above this level could open the door for continued price increases, whereas further rejections may signal that momentum is waning, despite the enthusiasm among retail investors.

Retail FOMO and Shifting Market Sentiment

Recent data from Santiment indicates a rise in the use of terms like “higher” and “above” across platforms such as X, Reddit, and Telegram, as Bitcoin began to recover from earlier losses. This increased retail confidence coincided with price stabilization, triggering a wave of FOMO reminiscent of past cycles where excitement preceded market corrections.

Retail Interest Graph Source: Santiment

This is significant since market movements frequently occur in opposition to retail positioning. While FOMO was on the rise, Bitcoin's price stagnated instead of continuing its upward trend, suggesting that emotional buyers entered the market late as momentum began to fade.

Analyzing Bearish RSI Divergence

The RSI divergence illustrates that, despite Bitcoin's attempts to rise, the RSI indicator showed lower highs. This trend often signals weakening momentum, even when the price stays at key support levels. Buyers have been responsive each time the RSI dipped into mid-range territory, which has provided some stability. However, this doesn’t negate the cautious sentiment indicated by the current momentum metrics.

Potential for a Supply Zone Breakthrough

A strong move beyond the $96,500 threshold could have alleviated concerns at the $94,000 resistance level and created a pathway to reclaim $100,000. If buyers could establish control at that point, attention could shift to the upper target near $105,000.

Conversely, a failure to surmount this resistance zone would put increased focus on nearby support levels. With divergence still present, a drop below this support could signal that retail optimism is outmatched by market exhaustion at this time.

Conclusion

In summary, as enthusiasm among retail investors increases, Bitcoin faces a critical juncture that might lead to significant price movement. While the potential for gains exists, caution remains warranted as market sentiment can quickly shift.