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The price of Bitcoin (BTC) has experienced a significant decline in the past 24 hours and has fallen below the critical threshold of $70,000. After peaking at $73,620 on Tuesday, the cryptocurrency has fallen about 5.7%, hitting a low of $68,830 on Friday. Analysts point to several key factors behind this decline:
#1 Risk sentiment ahead of the US elections
The timing of Bitcoin’s price drop coincides with former President Donald Trump’s narrowing lead over Democratic Vice Presidential nominee Kamala Harris on prediction markets such as Polymarkt and Kalshi, where users bet on election results. Bitcoin is considered a “Trump hedge” due to the former president’s strong advocacy for the cryptocurrency sector.
Donald Trump has proposed setting up a “strategic Bitcoin reserve” in the United States if he is re-elected. During his speech at the Bitcoin 2024 conference, he outlined plans to retain all Bitcoin currently owned or acquired by the US government as part of this reserve. This initiative is a core element of his campaign to strengthen the US as a leader, with the aim of making the country the ‘crypto capital of the planet’.
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Earlier this week, as Trump’s lead over Harris widened, Bitcoin neared its all-time high of $73,777. The shrinking of Trump’s lead appears to have prompted investors to take a risky stance, contributing to the price decline.
Crypto analyst HornHairs noted that risk reduction before the elections has a precedent. “Risking the election five to six days before it happens happened in both 2020 and 2016. Price then proceeded to never retest the lows of the week before the election. Be careful what you sell here,” he noted via X.
#2 S&P 500 loses three-month trend line
The correlation between Bitcoin and traditional financial markets may have also influenced BTC’s price movement. The S&P 500 has fallen to its lowest level since October 9, potentially impacting investor sentiment in the crypto space.
Analysts at The Kobeissi Letter noted that even as big tech companies like Apple reported strong profits, their stock prices have fallen. “Another tech giant beating earnings but trading lower,” they say notedadding that tech stocks faced widespread selling even as Meta, Amazon and Apple beat earnings expectations. They added: Markets appear to be reducing their risks ahead of next week’s election. Brace for volatility.”
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Crypto trader Marco Johanning marked cause the S&P 500 to lose its three-month trend line. “Given that the S&P 500 lost the three-month trendline yesterday, it looks more like a potential sell-off ahead of Tuesday’s US elections and lower prices in the near term. The perfect bounce level is the 7-month trendline (blue). I don’t want to see prices below the POC/key level around 63k (red),” he wrote via X.
#3 Use flush-out
Significant deleveraging in the markets has also contributed to Bitcoin’s price decline. The market correction appears to be a healthy response to over-expansion due to debt burden.
Noted crypto analyst Miles Deutscher noted: “This pullback is normal (and expected). The market has seemed overextended in recent days, largely driven by leverage. Still not heavily bought as it’s not a full cascade yet – it’ll wait until one of those days around the election. Not a bad DCA day for certain coins.”
Austin Reid, Global Head of Revenue & Business at crypto prime broker FalconX, pointed out that the crypto derivatives market was “on fire” before the election, with open interest for BTC, ETH and SOL crossing the $50 billion mark. the first time.
On-chain analyst Axel Adler Jr reported that there was open interest reduced by $2.1 billion, implying significant debt outflow.
According to facts Coinglass liquidated 93,864 traders in the past 24 hours, totaling $286.73 million. The largest liquidation order occurred on Binance’s BTCUSDT pair, worth $11.26 million. For Bitcoin alone, $81.38 million in long positions were liquidated – the largest amount since October 1.
At the time of writing, BTC was trading at $69,446.
Featured image created with DALL.E, chart from TradingView.com