Bitcoin Faces Decline Amid Ether ETFs' Lackluster Debut and Binance Legal Woes
Summary:
Bitcoin's price sees a 4.5% drop after failing to break past the $28,500 resistance, largely due to the underwhelming performance of newly launched Ether (ETH) futures ETFs and fears of an economic downturn. The rising job vacancies in the U.S. have led investors to anticipate contractionary measures by the Federal Reserve. The class action lawsuit against Binance and its CEO over claims of unfair competition further displays the potential regulatory and legal risks in the cryptocurrency market. The article also underscores the significant impact of traditional finance and macroeconomic factors on cryptocurrency markets.
From October 1 to October 2, Bitcoin's price rose by 6%, though it struggled to surpass the resistance of $28,500 and subsequently saw a 4.5% decline on the same day. This drop was largely attributed to the underwhelming debut of Ether (ETH) futures ETFs, which were introduced on October 2, and fears of a looming economic recession.
This downturn on October 3 marks 47 days since Bitcoin last closed over $28,000, leading to the liquidation of long-leverage futures contracts worth $22 million. However, before we delve into the impacts on Bitcoin and the crypto market, it's crucial to understand how traditional finance impacts investor confidence.
As U.S. labor market statistics revealed an increase in job vacancies, from 8.9 million in July to 9.6 million in August, investors anticipate further nation-wide economic measures by the U.S. Federal Reserve. Jerome Powell, Fed Chair, suggested during an August symposium that constrictions in the job market might provoke a monetary policy reaction.
Market traders now predict a 30% likelihood of the Fed raising rates in their November meeting, a significant increase from the previous week's 16%, as indicated by the FedWatch tool by CME.
On October 2, the introduction of nine new ETF products directly linked to Ether futures contracts took place. Despite the fanfare, trading volumes fell below $2 million during the initial trading day. This lackluster performance did not meet expectations, as observed by Eric Balchunas, senior ETF analyst at Bloomberg.
The inaugural trading volume for the Ether ETFs paled in comparison to the ProShares Bitcoin Strategy ETF's extraordinary $1 billion launch in October 2021. This disappointing debut has dampened the enthusiasm for any potential Bitcoin spot ETF inflows while uncertainty about U.S. Securities and Exchange Commission's approval timing remains.
Binance, one of the leading crypto exchanges, is facing a class-action lawsuit lodged in Northern California by its competitor, the now defunct-off exchange FTX, on October 2. It's alleged that Binance CEO Changpeng "CZ" Zhao engaged in unfair competition with manipulative market strategies harming its competitor.
The lawsuit alleges that Binance's selling off its FTX Token (FTT) holdings prior to the announcement made by CZ on November 6, 2022 was an intentional move to depress FTT prices. Notwithstanding CZ's rebuttals, speculation over this legal tussle persists in the crypto sector.
It's clear that Bitcoin's price fall on October 3 indicates concerns about an imminent economic recession and possible reactions by the Federal Reserve. It also highlights the sensibility of the cryptocurrency markets to macroeconomic factors.
Moreover, the exaggerated outlook for the crypto ETFs hints at investor hesitation in believing that Bitcoin will hit the $28,000 level amid regulatory and legal hurdles, such as the class-action lawsuit against Binance. Hence, it serves as a reminder of the inherent risks in the crypto sphere.
This article is meant for informative purposes only and doesn't substitute for professional investment or legal advice. The opinions conveyed in this write-up belong solely to the author and may not reflect Cointelegraph's perspective.
Published At
10/3/2023 6:50:10 PM
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