The Bitcoin price experienced a brief drop below $67,000 on October 21, but quickly recovered this level as support before the day’s end. Analysts attribute this decline in price to its connection with the stock market, which also faced a downturn of its own.
Reasons Behind Bitcoin’s Drop Below $67,000
The decrease in Bitcoin’s price below $67,000 can be largely attributed to its relationship with the US stock market. Data from IntoTheBlock indicates a strong positive correlation of 0.63 between the leading cryptocurrency and the S&P 500. On October 21, both the S&P 500 and the Dow index fell from their all-time highs before upcoming earnings reports.
Additional Readings
The slump in the stock market and the Bitcoin price drop are thought to be influenced by prevailing uncertainties in the macroeconomic landscape. These concerns are fueled by increasing inflation expectations and worries regarding government spending’s role in this trend. As a result, investors are exercising caution, with many preferring to wait for insights into the actions the US Federal Reserve might take to maintain inflation around the 2% mark.
The upcoming US election has also added to the market’s trepidation, especially with a closely contested presidential race anticipated between Donald Trump and Kamala Harris. It’s common for traders to adopt a wait-and-see approach until after elections for a clearer picture of the market dynamics under a new administration.
Other Influencing Factors on Price Decline
Analyst Justin Bennett pointed to several elements, including “open interest (OI) reaching July highs, whales reducing longs, and last week’s perpetual futures-driven rally,” as contributing reasons for the decline in Bitcoin’s price. He asserted that these factors, coupled with the upcoming US elections, played a significant role in the price drop.
Regarding the elections, Bennett highlighted that markets typically derisk prior to the US presidential election, which is merely thirteen days away. He remarked that it would have led to a “calamity” if markets didn’t adjust accordingly and continued to inflate heading into election night.
Additional Readings
Bennett made this observation while explaining why he had forecasted a pullback for Bitcoin and other cryptocurrencies. In fact, he has recently been indicating that a correction for the leading cryptocurrency was imminent. He previously mentioned he would not be shocked if the BTC price fell to approximately $63,000.
In a more recent post on X, he identified the $65,800 range as a significant threshold for Bitcoin’s price movement. A sustained trading level above this could potentially invalidate his trading strategy.
As of this writing, Bitcoin is trading at approximately $67,700, reflecting a nearly 2% decrease in the past 24 hours, according to CoinMarketCap data.
Featured image created with Dall.E, chart from Tradingview.com
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