Bitcoin Price Drops Amid Economic Concerns and Disappointing Ether ETF Launch
Summary:
The value of Bitcoin (BTC) fell by 4.5% after failing to break the $28,500 resistance, on growing concerns of an economic downturn and the underwhelming performance of the newly launched Ether (ETH) futures exchange-traded funds (ETFs). This comes amidst rising expectations of tighter measures from the US Federal Reserve and the ongoing lawsuit against Binance.US and its CEO. The article suggests a strong correlation between cryptocurrency market trends and macroeconomic factors, signaling continued risk in the crypto market.
Over the span of Oct.1 to Oct.2, Bitcoin (BTC) saw a price increase of 6%, but could not break the resistance point of $28,500. Following this, the price fell by 4.5% on the same day due to concerns about an upcoming economic slump and the lukewarm performance of the newly launched Ether (ETH) futures exchange-traded funds (ETFs). This price correction on Oct. 3 marked 47 days since Bitcoin closed above $28,000 last time, leading to a $22 million liquidation of long leverage futures contracts. However, before delving into the factors influencing Bitcoin and the cryptocurrency industry, let us try to comprehend the impact of conventional finance industry on investor confidence.
Anticipation of further regulatory measures by the Federal Reserve in the US is escalating, triggered by the new US labor market statistics published on Oct. 3 which revealed an increase in job openings from 8.9 million in July to 9.6 million by August's end. In a previous speech at the Jackson Hole Economic Symposium in August, Fed Chair Jerome Powell hinted towards possible measures in response to a persistently tight labor market. Consequently, traders now predict a 30% probability of the Fed hiking rates in their November meeting, a significant jump from the previous week's 16%, as per the CME's FedWatch tool.
The introduction of nine ETF products designed to track futures contracts linked to Ether on Oct.2 was greeted warmly by the market. Nevertheless, the trading volumes of these products fell short of expectations, lying below $2 million on the first trading day (by midday Eastern Time), as observed by Eric Balchunas, senior ETF analyst at Bloomberg. The debut day's trading volume for Ether ETFs lagged far behind the stellar $1 billion launch of the ProShares Bitcoin Strategy ETF, introduced in October 2021 at a time when the cryptocurrency market was thriving. This event might have negatively influenced investor perceptions regarding potential inflows following an eventual approval of a Bitcoin spot ETF. The uncertainty surrounding these approvals by the US Securities and Exchange Commission (SEC) continues.
Regulatory pressures continue to rise as Binance.US and its CEO Changpeng "CZ" Zhao face a class-action lawsuit filed in the Northern District Court of California on Oct. 2. The lawsuit accuses them of trying to monopolize the cryptocurrency market by damaging its competitor, the defunct exchange FTX. It is alleged that CZ's social media statements were false and misleading, especially considering Binance had already offloaded its FTT token holdings prior to the Nov. 6, 2022 announcement. The lawsuit insists that CZ intended to deflate the FTT token price. On Oct. 4, a criminal case against Sam Bankman-Fried will open in New York, and despite CZ's denial of the allegations, rumors continue to swirl within the crypto sphere.
The price drop of Bitcoin on Oct. 3 mirrored concerns of an imminent economic downturn and potential response from the Federal Reserve, underlining the close ties between the cryptocurrency and macroeconomic factors. High expectations for cryptocurrency ETFs also indicate that investors might not agree on the $28,000 level given the ongoing pressures and legal confrontations such as the Binance lawsuit, highlighting the continued risk involvement in this realm.
The details provided in this article are general information and are not intended as legal or investment advice. The views and opinions presented here are solely those of the author and do not necessarily correspond with or represent those of Cointelegraph.
Published At
10/3/2023 7:40:00 PM
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