Bitcoin’s adverse price developments that began at the start of the previous business week culminated in another nosedive earlier this morning to just over $80,000 on most exchanges.
This means that the asset tested this key support for the first time in nearly a month. Here are some of the possible reasons.
Pain in Asia
Earlier this week, Tom Lee warned that the major correction experienced in Asia’s largest equities could translate into a fresh pullback in the cryptocurrency markets. At the time, South Korea’s stock market dumped by 5% at one point, while Japan’s Nikkei 225 went from 69,000 on Friday to 67,130 on Tuesday.
After both indices tried to rebound in the following days, the landscape worsened in the past 24 hours. The Nikkei is down by roughly 6% in the past 24 hours alone, dumping from 68,375 to 64,130 before it rebounded slightly to 64,685 as of press time.
Korea’s KOSPI has performed even worse. It traded at 6,800 last Thursday before it tumbled to 6,000 at the start of the current business week. The weak recovery attempt pushed it north to 6,250 before it crumbled again in the past 24 hours to 5,550. This means that the index is down by over 18.5% in the past 5 days, and by nearly 8% in the last 24 hours alone.
As such, it’s perhaps no surprise that BTC dumped twice this week during Asian trading hours. Its latest leg down took place just a few hours ago, as it plummeted to a monthly low of $80,200.
CPI and ETFs
Macro pressure intensified yesterday when September CPI data came in slightly higher than expected. Similar developments are considered bearish for risk-on assets such as crypto, especially since they tend to influence the Fed’s decision-making process.
After yesterday’s announcement, BTC’s price immediately slumped by over a grand, while odds of an October Fed rate hike jumped from about 20%-25% to 50%.
“This means that inflation is broadening out, something that is not a good omen for the Fed and would raise the probability for an increase in rates at the end of the October FOMC meeting,” said Raymond James Chief Economist Eugenio Aleman. The next FOMC meeting is just two weeks away.
The ETF market felt the impact immediately. Data from SoSoValue shows that the daily flows went from $175.62 million in the green on Tuesday to $261.46 million in the red after the CPI announcement. Such major changes build up selling pressure.
Liquidations Near $1B
Bitcoin’s substantial price decline was not an isolated move, as the altcoins followed suit, as they typically do. Ethereum was particularly susceptible, as it plummeted toward $2,300. Naturally, the total value of wrecked positions is on the rise again, given the substantial amount of leverage in the market.
Over $960 million worth of leveraged positions has been wiped out daily, with $883 million coming from longs. ETH is responsible for the lion’s share at $290 million.
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