The robust momentum that recently propelled Bitcoin to a remarkable 31.8% gain over the last 30 days saw a sudden downturn on November 14, despite lower-than-expected United States inflation data, which indicated a 3.2% yearly increase. Traditional markets responded positively to flat month-over-month inflation, but Bitcoin, seemingly overheated, witnessed the liquidation of nearly $100 million within an hour.
Analysts, however, remain divided in their sentiments regarding this contraction in Bitcoin’s price, with some optimistic voices suggesting a potential trajectory toward $48,000.
Examining the factors influencing today’s Bitcoin price reveals a noteworthy development in the form of $126 million worth of Bitcoin longs being liquidated. The sharp movement in the Bitcoin futures market played a pivotal role in the swift decline, with long liquidations exceeding $97.9 million in just one hour on November 14, and a total of $126.3 million within the preceding 24 hours.
Such liquidations, unaccompanied by buying pressure, typically exert a negative impact on Bitcoin prices. Concurrently, Bitcoin trading volumes have witnessed a decline of over $7 billion since reaching a November high of $13 billion on November 9. Analysts are now debating the sustainability of the current Bitcoin price rally in the absence of consistent liquidity and trading volume. The potential for a rapid recovery exists if there is an upturn in liquidity.
The futures market further reflects anticipation of a pullback, with over 54% of traders maintaining a short position on Bitcoin.
Despite the November 14 setback, a record percentage of Bitcoin wallets remained in profit as of November 11, with over 83% of short-term and long-term holders currently in the black. This record, however, coincides with a decline in trading volume and may lead to continued Bitcoin price decreases if more traders decide to realize profits.
Amidst short-term uncertainty, institutional investors, such as BlackRock and Invesco Galaxy, remain committed to their long-term outlook. Despite a challenging U.S. regulatory environment, these institutions have ETF tickers listed, highlighting an enduring interest in the cryptocurrency market.
Attention is now focused on spot Bitcoin ETF applications. Despite the urgency expressed by major financial firms, the Securities and Exchange Commission (SEC) appears inclined to continue delaying decisions on approving Bitcoin ETFs until 2024. Notably, BlackRock has cited stablecoins, including USD Coin (USDC) and Tether (USDT), as potential risks to Bitcoin’s price in its communication with the SEC.
Macro-economic events, regulatory actions, ETF developments, and interest rate fluctuations continue to directly impact Bitcoin’s price. Despite the recent pause in interest rate increases by Federal Reserve Chair Jerome Powell, Bitcoin did not immediately respond positively. However, some analysts interpret this pause as a precursor to Bitcoin’s potential surge to $69,000 in the short term.
In the long term, market participants remain optimistic about the recovery of Bitcoin’s price, particularly as more financial institutions appear to be embracing the cryptocurrency.