Last week, we talked about the upward potential of Bitcoin’s price. Uptober was doing great and great things were expected early in November. However, that kind of optimism waned in the wake of the most recent price drop that took off almost $2,000 from Bitcoin’s price. Currently trading at just over $18,000, Bitcoin has hit a new low and is bringing the market down with it. So, what’s the reason for the latest drop after a relatively quiet period? Warring crypto billionaires might be to blame.
Breaking Down the Stock Market Correlation
For the past year, Bitcoin has been closely related to the stock market performance. With prices dropping to the low $17,000 on November 8, a new yearly low, Bitcoin’s correlation to the stock market is broken. NASDAQ is only down 0.32%, while Dow Jones saw 0.48% gains. In the middle of the midterm elections in the USA, Bitcoin’s price has fallen down once again, and this time it’s a pretty bad drop.
Why is that? Over $224 million BTC longs were liquidated on November 8, and more may be on the way. If the FTX situation is not resolved soon (showing over $6 billion deficit right now), a sharp sell-off could trigger a liquidation cascade. This could send the price to new lows, which we certainly don’t want.
The good news is that Binance has made a bid to purchase FTX, and the deal is supposed to pass through soon. However, it won’t happen if the spat between the leaders of both exchanges is resolved. Negative news about FTX’s sister companies are bringing the exchange down, and could lead to numerous withdrawal requests. This would destabilize the market further, which means new price drops. It never ends, doesn’t it?
Rising interest rates in the USA and the negative global approach to cryptocurrencies is further weighing the price down. Altcoins are suffering too, erasing all the great effort made in regards to the price in the past few months. Bitcoin’s volatility has been wiped, and great things were expected until this latest blow. Suppressed retail and institutional inflow isn’t helping, leaving the market’s state in limbo.
What Happens Next?
Is there a chance for the price to reverse course? Of course – anything can happen by the end of the year. The short-term insecurities don’t seem to have changed the long-term outlook. Over 90% of institutional investors are interested in tokenized assets for the coming years. In layman’s terms, people still believe in DeFi and the blockchain technology, and nothing will ever shake up their beliefs.
FTX’s worries are key to the waning crypto prices, but this too shall pass. As soon as the exchange’s future is resolved, we expect the price to go up as well. We’ve seen it done before and it’ll surely happen again. As more and more institutions and companies turn to digital assets, especially for settlement purposes, Bitcoin’s price could gain an upward momentum, which is what we’re all waiting for.