Why Bitcoin prices are falling sharply
What's the story
Bitcoin, the world's largest cryptocurrency by market capitalization, has seen a major dip in its value. The digital currency fell below $90,000 on Tuesday after hitting a record high of over $126,000 in early October. The cryptocurrency has lost nearly 30% value in a month. This sudden drop has left many investors wondering what caused this sharp decline.
Market influences
Factors contributing to Bitcoin's recent price drop
The recent fall in Bitcoin's value can be attributed to a number of factors. These include fears of a renewed trade war with China, delayed economic data from the US, and fading expectations of an interest rate cut by the Federal Reserve. All these factors have prompted investors to turn toward safer assets instead of volatile cryptocurrencies like Bitcoin.
Market volatility
Ether cryptocurrency also feels the market pressure
The decline isn't limited to Bitcoin alone. Ethereum has also been under pressure for months, losing nearly 40% of its value from a peak above $4,955 in August. Other cryptocurrencies such as Dogecoin and Solana have also witnessed a similar fate. The entire crypto market is feeling the heat of these changes, with $20 billion worth of Bitcoin trades being liquidated, according to Rachael Lucas, a crypto analyst at BTC Market.
Economic impact
US government shutdown impacts financial markets
The longest US government shutdown on record has prevented the release of key economic data. These figures are critical for understanding how much further the Federal Reserve could cut interest rates in the coming months to boost the economy. Some Fed officials have indicated that a rate cut may not happen at their next monetary policy meeting in December, further impacting Bitcoin's value and other perceived riskier assets.
Future outlook
Market expectations and potential recovery
Simon Peters from brokers eToro, said that renewed market expectations for a rate cut in December could quickly reverse prices. This indicates that if the Federal Reserve does decide to cut interest rates, it could lead to a sudden rally in Bitcoin's value. However, John Plassard of Cite Gestion warns that this "disenchantment reflects a deeper reality," leaving individuals wary due to previous price plunges.