Why is Bitcoin price so volatile today?
The price of Bitcoin (BTC) fell to $66,569 on July 22, less than 24 hours before the much-anticipated launch of spot Ethereum ETFs in the United States.
The bullish momentum that led BTC above $68,000 came into question as traders struggled to find a few daily closes above $68,000.
Aside from the impact on Bitcoin's price of US President Joe Biden's withdrawal from the November presidential race, the pioneering cryptocurrency is facing another issue: the strengthening US dollar.
Let's take a closer look at the factors influencing the price of Bitcoin today.
The US dollar has started to recover.
The US dollar index ( DXY ), which tracks the greenback's performance against the world's major currencies, rose 0.7% to 103.85 from a July 17 low of 103.18, ahead of the US personal consumption expenditures (PCE) index. .
The PCE, known as the Federal Reserve's “preferred” measure of inflation, is due to be published on July 26, showing strong second-quarter gross domestic product and higher unemployment figures. This will likely provide a tailwind for the DXY and boost volatility for Bitcoin and other cryptocurrencies over the weekend.
From a technical perspective, the US Dollar Index looks on track to rally over 1.8% in 2024 to complete a V-shaped recovery above 106.
Bitcoin bulls book gains in political uncertainty
Biden's nomination and endorsement of Vice President Kamala Harris for president has introduced some volatility into the market.
While Republican presidential candidate Donald Trump included a position on bitcoin in his campaign, Harris' stance on cryptocurrencies remains unclear.
A market intelligence firm said the market appears to be reacting to Joe Biden's sidestepping, as it did with news of Trump's assassination, with “minimal fear reduction in crypto prices.”
Despite the different circumstances, the news of Trump's assassination attempt 2 weeks ago resulted in a similar price pattern. During the closing hours on Sunday, prices rose quickly after the initial drop and are now very volatile to start the week.
According to Marcus Thielen, founder of 10x Research, Bitcoin's decline could signal that traders will book profits ahead of Trump's speech at the Bitcoin Conference on Saturday, July 27.
“Taking profits or shorting bitcoin before Trump's Nashville speech could be a costly exercise,” Thielen wrote in his July 22 newsletter.
Thielen went on to say that Bitcoin is struggling with strong resistance from the 2021 all-time high of $69,000, and that BTC “could rise parabolically” once the price gets a critical close above that level.
Related: BTC price down 8% from all-time high – 5 things to know in Bitcoin this week
Bitcoin long liquidity rises.
The high activity in the Bitcoin futures market seems to have caused the price of BTC to fall in the last 12 hours. A period of prolonged liquidity has been linked to a sharp decline in the value of the pioneer cryptocurrency.
According to data from Coinglass, more than $7.16 million was liquidated in long BTC positions in the last 12 hours. The total liquidity in the crypto market reached 41 million USD, 23.3 million USD is long liquidity in the same period.
Typically, long drawdowns occur when the price of a traded asset suddenly drops. Because traders who were bullish on the asset and opened long positions will suffer losses as the market moves against them.
According to data from blockchain data provider CryptoQuant, the number of bitcoins transferred to exchanges peaked on July 22.
Increased foreign exchange inflows for a particular asset indicate increased selling pressure in the market.
With the increasing number of BTC sent to popular exchange wallets, investors seem to be taking profits explaining the volatility in the price of Bitcoin at the current price.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
