Bitcoin opened this week with a bang. It constantly tested the $28,000 range and even went nicely over it late on Monday before dropping all the gains. Projections for Halloween were great, but sometimes, it all takes a bad turn. As of right now, the price is once again in the mid-$27,000 range, which is a huge drop from a few days ago. What’s the reason behind it? Apparently, it’s concerning signals from the US economy.
As the country tries to weigh in on investor sentiment, there’s been a lot of talk about an overheated economy. This could lead to more Fed action that no one wants, and that kind of sentiment is the reason behind Bitcoin’s latest price drops.
More Fed Action to Follow?
Some further contractionary measures are expected out of the US Federal Reserve after the release of latest US labor market data. The report from October 3 showed abysmal reports of 9.6 million job openings across the USA, which is a significant jump from the 8.9 million job openings reported in July.
The price of Bitcoin went up over 6% from October 1 to October 2. However, it failed to break past the $28,500 resistance. On the same day, it dropped around 4.5% after hearing the latest economy news. The decline also followed Ethereum’s disastrous performance as ETFs were launched on October 2. It showed major concerns about an upcoming economic fallback.
The latest correction marks almost 50 days—47 to be precise—of the last time when Bitcoin managed to close a day above $28,000. That’s not a very good sign, and has led to the liquidation of over $22 million worth of long leverage futures. The overheated US economy can lead to more Fed action in the following weeks and months, and this might be even bleaker in the short run.
A Necessary Monetary Response
The Federal Reserve chair Jerome Powell said that the latest reports are truly concerning. All evidence suggests that the tightness in the labor market is no longer easing, which could necessitate a monetary policy response. Traders are pricing in a 30% chance that the Fed raises rates during the November meeting. That’s up from the expected 16% last week per the FedWatch tool. According to the Fed’s policymakers, the rates could stay high for a longer period.
In more bad news, the Ether futures launched on October 2 fell short. There were a lot of positive expectations for it but in the end the trading volumes fell below $2 million during the first trading day. That can be seen as a failure, and it reflected in Ethereum’s dropping price.
The initial first day projection of $1 billion of trades during the first day were obviously very optimistic. This occurrence may have flattened expectations for the first Bitcoin spot ETF when it launches. Of course, there are many uncertainties regarding the probability and timing of these spot ETF approvals by the SEC. It’s all very new and with mountain regulatory pressure, no one can tell how they perform.