As a seasoned crypto investor with a decade of market experience under my belt, I’ve seen my fair share of rollercoaster rides. The recent dip in Bitcoin’s price below $67,000 is just another reminder that the cryptocurrency market can be as unpredictable as a political campaign (and sometimes more so).
On October 21, the Bitcoin price momentarily dipped below $67,000 but soon regained that level as a base prior to closing for the day. This temporary drop in price is thought to be connected to Bitcoin’s correlation with the stock market, which also saw a decline of its own around the same time.
Why The Bitcoin Price Dropped Below $67,000
The fall in Bitcoin’s price below $67,000 can largely be attributed to its connection with the U.S. stock market. Data from IntoTheBlock reveals a strong positive correlation between Bitcoin and the S&P 500 (currently at 0.63), suggesting that their prices tend to move together. The S&P 500 and Dow Jones indexes dropped from their peak levels on October 21, just before earnings reports were due.
It’s thought that the recent fall in the stock market and Bitcoin’s price decline is due to a sense of instability in the broader economic landscape. This uncertainty arises from increasing concerns about future inflation rates and doubts about how government expenditures might be fueling this trend. As a result, investors are currently adopting a wait-and-see approach, eagerly anticipating the actions that the U.S. Federal Reserve may take to ensure that inflation remains close to their 2% goal.
The forthcoming U.S. election is adding to the market’s apprehension, particularly since the presidential contest between Donald Trump and Kamala Harris appears to be closely contested. It’s not uncommon for traders to hesitate on the sidelines until after the elections, seeking clarity about the market direction under the incoming President.
Other Factors Contributing To The Price Crash
According to analyst Justin Bennett, several elements played a role in the recent drop of Bitcoin’s price. These include open interest (OI) reaching record levels in July, large investors (often referred to as “whales”) selling their long positions, and a significant increase in the price due to perpetual contracts (perp) during the last week. Bennett also pointed out that the forthcoming US elections were another major factor contributing to this price crash.
Concerning the upcoming US presidential election, the analyst pointed out that historically, financial markets tend to reduce risk as the election nears, which is only thirteen days off. He emphasized that it would have been disastrous if the markets didn’t take precautions and kept investing up until election night.
Bennett expressed this remark as he pointed out the reasons for his prediction of a decline in Bitcoin and other cryptocurrencies. In fact, the analyst has been expressing since last week that a price adjustment for Bitcoin was imminent. Previously, he had suggested that it wouldn’t surprise him if the Bitcoin price dropped to around $63,000.
More recently, in his latest post, he emphasized that the Bitcoin price might first encounter resistance within the range of $65,800. If it manages to maintain itself above this threshold, it could potentially undermine his trading strategy setup.
Currently, as I’m typing this, the value of a single Bitcoin hovers near $67,700. Over the past day, it has dropped by nearly 2%, based on information from CoinMarketCap.
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2024-10-22 18:04