Bitcoin Price Drops Again By $64K – Here’s Why

Bitcoin (BTC) has failed to sustain levels above $66,000 since July 31, despite a 5.2% gain between October 3 and October 7. Some analysts say Bitcoin will benefit from the ever-growing United States federal debt. However, while this correlation appears to be valid, it has little effect on short-term price trends.

In fact, social and political events seem to be the primary driver of Bitcoin's limited reversal, the global monetary base (M2) increased from $104 trillion in June to $108 trillion in June, Bitcoin has been rejected several times at $68,000 resistance. Level. This suggests that the rally to $64,000 may not depend on the state of the US budget.

Further evidence that weakens this relationship is the strengthening of the US dollar against other major international currencies as measured by the DXY index – it rose to 102.5 on October 7 from 100.4 on September 30. If investors fear US government debt, why are they pulling out of the euro, British pound or Swiss franc so uncontrollably?

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Recent US macro data has not been favorable for Bitcoin prices

To understand why the price of Bitcoin has not been able to sustain a level above $66,000 over the past eight weeks, one must start by analyzing what is limiting the improvement in investor sentiment. For example, uncertainty regarding global economic growth, the escalating conflict in the Middle East and the impact of the upcoming US presidential election in November are significant factors.

Stronger-than-expected September US jobs data released on October 4 reduced the odds of a recession. However, a 0.50% interest rate cut has pushed the probability of a rate cut to 0%, down from 40% two weeks ago, according to CME's FedWatch tool. Prolonged high interest rates make investors more vulnerable, which hurts Bitcoin's value.

Moreover, current macroeconomic data has led investors to raise their positive estimates for third-quarter corporate earnings, prompting global investment bank Goldman Sachs to raise its 2025 S&P 500 target to 6,300, Reuters reported. Goldman said a “recovery in the semiconductor industry cycle” will further support earnings momentum.

Regardless of the Bitcoin bulls' view of how the price of BTC will respond to the global economic downturn, the recent stimulus measures announced by China will greatly reduce the need for alternative hedges. Hong Kong's stock market index hit a 32-month high on Oct. 7, closing 9.3% above levels since Sept. 30, while the S&P 500 is 0.5% below its all-time high.

Bitcoin derivatives metrics and ETF outflows

Despite the general volatility in the global stock markets, the price of Bitcoin failed to maintain the level above $66,000, and above all, the sentiment of the initial traders is neutral. The annualized premium of the monthly BTC futures market serves as a primary bullish measure.

In independent markets, those derivative contracts sell at a 5% to 10% annual premium to compensate for longer settlement periods. However, if used long (buy) demand increases, this premium can easily exceed 15% or 20%. Conversely, periods of depression result in negative premiums, also known as lags.

Note that the annualized premium for BTC futures remains at 8%, indicating that demand is balanced between bulls and bears. Part of traders' lack of delinquency stems from recent outflows from bitcoin spot exchange-traded funds (ETFs), which have seen net outflows of $335 million since Oct. 1, according to Farside Investors data.

Ultimately, the reasons why Bitcoin is pegged below $64,000 are mainly the macroeconomic environment that supports the stock market and investors seeking protection in cash positions ahead of social and political unrest.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.