Bitcoin Price Corrects as Market Faces Regulatory Pressure and Economic Concerns
Bitcoin (BTC) experienced a 6% price gain from October 1 to October 2, only to drop by 4.5% on the same day after failing to break the $28,500 resistance level. This correction was attributed to the disappointing performance of Ether (ETH) futures exchange-traded funds (ETFs) that were launched on October 2, as well as concerns about an upcoming economic downturn.
The decline in Bitcoin’s price marked the end of a 47-day period since it last closed above $28,000 and resulted in the liquidation of $22 million worth of long leverage futures contracts. Before delving into the events affecting Bitcoin and the wider cryptocurrency market, it’s crucial to understand how the traditional finance industry has impacted investor confidence.
Investors have become increasingly expectant of further contractionary measures by the U.S. Federal Reserve following the release of the latest U.S. labor market data on October 3. The data revealed that there were 9.6 million job openings at the end of August, up from 8.9 million in July. Federal Reserve Chair Jerome Powell had previously hinted at the possibility of a monetary policy response if there was evidence that tightness in the labor market was no longer easing.
As a result, traders have started pricing in a 30% chance of the Fed raising rates at their November meeting compared to 16% in the previous week, according to the CME’s FedWatch tool.
In terms of the cryptocurrency market, October 2 saw the introduction of nine ETF products designed to mirror the performance of futures contracts linked to Ether. However, these products experienced low trading volumes of under $2 million on their debut day, falling short of expectations. For comparison, the ProShares Bitcoin Strategy ETF had a remarkable $1 billion launch in October 2021 during a thriving cryptocurrency market.
The underwhelming performance of the Ether futures ETFs may have dampened investors’ outlook on the potential inflow after an eventual Bitcoin spot ETF. Additionally, uncertainties remain concerning the probability and timing of the U.S. Securities and Exchange Commission (SEC) approving these ETFs.
Regulatory pressure continues to mount in the cryptocurrency market, with Binance facing a class-action lawsuit filed against its U.S. branch and CEO Changpeng “CZ” Zhao. The lawsuit accuses Binance.US of unfair competition aimed at monopolizing the cryptocurrency market by harming its competitor, the now-defunct exchange FTX. Allegations state that CZ’s statements on social media were false and misleading, with claims that Binance sold its FTT token holdings before a November 2022 announcement, intending to drive down the token’s price.
Meanwhile, the criminal case against Sam Bankman-Fried, the founder of FTX, is set to begin on October 4 in New York. Despite CZ’s denial of unfair competition allegations, speculation within the crypto community persists regarding this matter.
The decline in Bitcoin’s price on October 3 reflects concerns about an imminent economic downturn and the potential monetary policy response by the Federal Reserve. This correction also highlights the close correlation between cryptocurrency markets and macroeconomic factors. The exaggerated expectations for cryptocurrency ETFs indicate that the $28,000 level might not be the consensus for investors, given the regulatory pressures and legal challenges facing the industry.
It’s important to note that this article is for general information purposes and should not be taken as legal or investment advice. The views and opinions expressed here belong to the author alone and do not necessarily reflect those of Cointelegraph.
