Why is Bitcoin price down today?

Why is Bitcoin price down today?

After breaking above $21,500 on November 4, the price of Bitcoin (BTC) fell 14% on November 8, hitting a new yearly low of $17,166 – and most altcoins are following suit.

While Binance and FTX news initially caused the market to rise slightly, the day turned south as various unconfirmed sources speculated that FTX’s losses could show a $6 billion shortfall.

This price drop breaks Bitcoin’s short-term correlation to the stock market, with the tech-heavy Nasdaq falling just 0.32%, while the Dow Jones gained 0.48% on investor optimism regarding the November 8 midterm elections in the United States.

Amid the current volatility, $614 million worth of BTC longs are at risk of being liquidated, with over $224 million liquidated on November 8. The fear for many is that if the FTX situation is not resolved by Binance’s offer to buy the exchange, a steeper sell-off in the market could trigger a cascade of liquidations and send the price of BTC crashing to new heights. lower.

BTC long versus short and liquidations. coin glass

Let’s take a look at the main reasons why the price of Bitcoin is down today.

FTX capitulates after investor fears of a bank run sap its liquidity

Bitcoin price is reacting to the stress exerted on the market by FTX, hitting a yearly low after a period when many believed the bear market bottom had been found.

The implosion of Terra in May 2022 and the ultimate collapse of LUNA – since renamed LUNA Classic (LUC) – produced the first seven-week losing streak in Bitcoin history. The market is drawing parallels between FTX’s current bank run, the perceived large budget hole, and what happened to Terra earlier this year.

Rising Interest Rates in the U.S. and Abroad Weigh on Bitcoin Price

According to the Consumer Price Index report, inflation in the United States increased by 0.6% in September.

The Consumer Price Index report – the most watched barometer of inflationary pressure in the United States – rose to 8.2% in September 2022 from September 2021, slightly higher than the 8, 1% predicted by the experts.

With the next CPI reporting event on November 10, Bitcoin has seen a volatile decline of 12% in 24 hours, reaching all-time highs for 2022.

Bitcoin price index. Source: Cointelegraph

Retail and Institutional Entries Removed

While the number of consumers investing in crypto has increased significantly in 2021, prices are being heavily affected by retail traders looking to make money from these changes. And since June, Bitcoin has remained stable, largely stuck in the $18,000-$21,000 range after falling from its November 2021 all-time high at nearly $68,000. Going below the all-year low may not instantly pique investor interest.

According to independent market analyst Jaran Mellerud, Bitcoin’s on-chain activity has been declining all year. Coinbase’s second-quarter trading volumes fell by about half to $217 billion.

Between mid-June and mid-July, Binance reported a 50% drop in volume, while Kraken and Gemini saw declines of 75% and 80%, respectively.

Binance.US was a prominent exception, reporting a 2% reduction after bitcoin trading fees were halted in June.

FTX had a run on the stock market, recording a net outflow of $1.1 billion in the first week of November.

FTX output graph. Source: DuneAnalytics

Related: Why is the crypto market down today?

Is there a chance that Bitcoin price will change course?

Short-term cryptocurrency uncertainties do not appear to have changed the long-term outlook for institutional investors. According to BNY Mellon CEO Robin Vince, a survey commissioned by the bank found that 91% of institutional investors were interested in investing in tokenized assets over the next few years.

Around 40% of them already have cryptocurrencies in their portfolios and around 75% are actively investing in digital assets or considering doing so.

Concerns over FTX’s potential insolvency are clearly key to Bitcoin price hitting a new yearly low.

In the long term, market participants still expect the price of Bitcoin to rise, especially as more and more banks and financial institutions apparently turn to digital cash for settlement purposes. .