Bitcoin price has pared its gains earlier in the week – here’s why.
The price of Bitcoin (BTC) increased by 6% from October 1 to October 2 but failed to break the $28,500 resistance, the price fell by 4.5% on the same day. The decline was caused by the disappointing performance of Ether (ETH) futures exchange-traded funds (ETFs) launched on October 2 and concerns about the impending recession.
This Bitcoin price correction on October 3 marked 47 days since Bitcoin last closed above $28,000, and led to the loss of $22 million in long-term leveraged futures contracts. But before discussing the events affecting the Bitcoin and cryptocurrency market, let's try to understand how the traditional financial industry affects the confidence of investors.
An overheated U.S. economy could lead to more federal action.
After the release of the latest US labor market data on October 3, investors increased their expectations of further contracting measures by the US Federal Reserve, which showed that there were 9.6 million job openings at the end of August, up from 8.9 million in July.
“Evidence that the tightness in the labor market is not easing may require a monetary policy response,” Fed Chairman Jerome Powell said in a speech at the Jackson Hole Economic Symposium in August.
As a result, traders are now pricing in a 30% chance the Fed will raise rates at their November meeting, compared with 16% last week, according to CME's FedWatch tool.
Launch of Ether Futures ETFs is short.
On October 2, the market welcomed nine new ETF products designed to mirror the performance of Ether-linked futures contracts. However, these products have seen less than $2 million in trading since their first day of trading, at noon Eastern. Bloomberg's senior ETF analyst Eric Balchunas said trading volumes fell short of expectations.
On the first day, the trading volume of the Ether ETF was followed by the impressive launch of the ProShares Bitcoin Strategy ETF, which lagged behind by $1 billion. It is significant that an ETF linked to Bitcoin futures will be introduced in October 2021 during a booming cryptocurrency market.
This event may have limited investors' view of potential inflows after Bitcoin spot ETFs. Still, there is uncertainty over the likelihood and timing of these approvals by the US Securities and Exchange Commission (SEC).
Regulatory pressure increases as Binance faces class-action lawsuit
On October 2, a class-action lawsuit was filed against Binance.US and its CEO, Changpeng “CZ” Zhao, in a Northern California district court. The lawsuit alleges unfair competition aimed at monopolizing the cryptocurrency market to the detriment of competitors.
The plaintiffs allege that CZ's statements on social media were false and misleading, especially since Binance had previously sold its FTT token holdings prior to the announcement on November 6, 2022, and that CZ's interest was in causing the FTT token price to drop, the lawsuit alleges. .
The criminal trial against Sam Bankman-Fried will begin in New York on October 4. Despite CZ's denial of unfair competition allegations, speculation in the crypto community continues to circulate on this matter.
BTC's correlation with traditional markets seems to be higher than expected
Bitcoin's price drop on October 3 appears to reflect concerns about the impending recession and the Federal Reserve's monetary policy response. It also showed how closely linked cryptocurrency markets are to macroeconomic conditions.
Inflated expectations for cryptocurrency ETFs The $28,000 level may not be a consensus for investors as regulatory pressures and legal challenges such as the class-action lawsuit against Binance highlight the ongoing risks in the space.
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.
