Why Did Bitcoin Prices Fall? Experts Assess: “The Market Has Turned Into a Powder Keg”
Bitcoin, the world's largest cryptocurrency, has entered a bear market just weeks after hitting an all-time high of $126,200 on October 6. Its value has fallen 21%, with contributing factors including dwindling trading volume, increasing volatility, and weak institutional interest. October marked Bitcoin's first losing month in seven years, exacerbated by a sharp 5% drop amid global risk market concerns over tech stock valuations like Palantir. The market experienced the largest long liquidation in Bitcoin futures history on October 10, further shaking investor confidence. Analysts highlight macro factors such as uncertainty around Federal Reserve interest rate cuts, the US government shutdown, and declining risk appetite. Investors have also sold Bitcoin to offset losses in the stock market, adding pressure to the cryptocurrency's recovery.
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Bitcoin Enters a Bear Market
Bitcoin, the world's largest cryptocurrency, has officially entered a bear market just weeks after reaching an all-time high. The cryptocurrency, which was approaching the $100,000 level, has lost 21% of its value since achieving a record high of $126,200 on October 6.
Investors Face Disappointment in October
Hopes for an Uptober breakout were crushed as Bitcoin investors experienced their first losing October in seven years. A sharp 5% drop on Tuesday coincided with weakness in global risk markets, driven by valuation concerns over tech stocks like Palantir. This further eroded confidence during an already challenging period.
Market Struggles Persist
Analysts suggest that selling pressure is not a new phenomenon for Bitcoin. Key factors such as shrinking trading volume, rising volatility, and weakening institutional appetite have plagued the cryptocurrency for weeks. Alex Kuptsikevich, chief market analyst at FXPro, highlighted that the sentiment index fell to 21, its lowest level since April 9. He noted, "There was a brief recovery when this zone was entered last month, but this time the market has fallen even below those levels."
Major Liquidations in Bitcoin Futures
The sharp sell-off on October 10 triggered the largest long liquidation in Bitcoin futures history. Haonan Li, founder of Codex, described the situation as "utter exhaustion." VALR CEO Farzam Ehsani warned about the risk of massive liquidations, noting that:
- $11.39 billion worth of short positions could be liquidated if the price rises.
- $7.55 billion worth of long positions could be liquidated if the price falls.
Ehsani added, "This is turning the market into a powder keg."
Aftermath of Liquidations and Broader Market Concerns
The market has yet to recover from the series of liquidations at offshore derivatives exchanges in early October, which severely shook investor confidence. According to Li, "Liquidations were the beginning; now the macro view has taken control."
This week's market sentiment remains subdued due to various external factors, including:
- Tech stock valuation concerns.
- Uncertainty surrounding the Federal Reserve's interest rate cut plans.
- The threat of an impending US government shutdown.
Marcus Sturdivant, managing director at ABC Squared, commented, "As stocks and Bitcoin fell simultaneously, some investors sold their Bitcoin holdings to salvage their positions in the stock market."