After topping the $21,500 mark on Nov. 4, Bitcoin (BTC) price fell by 14% on Nov. 8, reaching a new annual low of $17,166 and most altcoins followed suit.
This price drop broke Bitcoin’s short-term correlation to the stock market, with the tech-heavy Nasdaq down only 0.32%, while the Dow Jones gained 0.48% on the back of investor optimism about the November 8 US Midterm elections.
In the backdrop of the current volatility, $ 614 million in BTC longs are at risk of liquidation with over $ 224 million liquidated on November 8. The fear for many is that if the FTX situation is not resolved by Binance’s bid to buy the exchange, a sharp. sell-off in the market can trigger a liquidation cascade and send the price of BTC to new lows.
Let’s examine the main reason why the price of Bitcoin is down today.
FTX capitulates after investors fear about the bank running its liquidity sap
The price of Bitcoin was reacting to the stress placed on the market by FTX, reaching an annual low after a period where many thought the bottom of the bear market never found.
The May 2022, Terra Luna The implosion and final collapse of LUNA Classic was produced first 7-week losing streak in Bitcoin’s history. Markets are drawing parallels between FTX’s current bank run, which is seen as a huge budget hole, and what happened to Terra Luna earlier this year.
Rising interest rates in the US and abroad weigh on the price of Bitcoin
The Consumer Price Index report – the most widely followed barometer of inflationary pressures in the United States – rose 8.2% in September compared to the same month a year ago, slightly more than the 8.1% predicted by experts.
With the upcoming CPI reporting event on November 10, Bitcoin saw a volatile 12% drop in 24 hours reaching a record low for 2022.
Retail and institutional inflows are suppressed
As the number of consumers investing in crypto increases dramatically in 2021, prices are heavily influenced by retailers looking to cash in on the shift. And since June, Bitcoin has been flat, stuck largely in the $18,000 to $21,000 range after falling from its November 2021 all-time high near $68,000. Falling below all-year lows may not immediately spur investor interest.
According to independent market analyst Jaran Mellerud, Bitcoin on-chain activity has decreased for the entire year. Coinbase’s second quarter trading volume fell by about half to $217 billion.
Between mid-June and mid-July, Binance reported a 50% drop in volume, while Kraken and Gemini saw 75% and 80% drops respectively.
Binance US is a notable exception, reporting a 2% reduction after ending Bitcoin trading fees in June.
FTX has witnessed a run on the bank, seeing a net outflow of $1.1 billion in the first week of November.
Related: Is the crypto market down now?
Is there a chance for Bitcoin price to reverse course?
The short-term uncertainty in cryptocurrencies does not seem to change the long-term outlook of institutional investors. According to BNY Mellon CEO Robin Vince, a poll commissioned by the bank found that 91% of institutional investors were interested in investing in tokenized assets in the following year.
Around 40% of them already have cryptocurrency in their portfolio and approximately 75% are actively investing in digital assets or considering doing so.
Concerns about the potential insolvency of FTX are clearly important in the price of Bitcoin sweeping a new annual low.
In the long term market participants still expect the price of Bitcoin to rise, especially as more banks and financial institutions are likely to convert to digital cash for settlement purposes.
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