New Plunge Of Bitcoin: Why Is The Market Struggling To Take Off?

Bitcoin is experiencing a significant decline, reviving investor concerns. After hovering around $66,000 last week, its price fell to $62,501 on Tuesday, a drop of 5.3%.

The Catalysts of an Unexpected Decline

This sudden drop originates from several key factors. Firstly, statements by Jerome Powell, chairman of the Federal Reserve, cooled market enthusiasm.

During a speech in Nashville on September 30, Powell tempered expectations regarding interest rate cuts, predicting only two reductions of 25 basis points each by the end of the year.

This perspective led to an adjustment in market expectations. According to the CME FedWatch Tool, the probabilities of a 50 basis point rate cut in November dropped from 53% last Friday to 38.2% after Powell’s remarks.

Moreover, the escalation of tensions in the Middle East has increased investors’ risk aversion, weighing on volatile assets like Bitcoin.

A Bitcoin Market Demonstrating Its Resilience

Despite this decline, several indicators suggest underlying resilience in the Bitcoin market. Data from CryptoQuant reveals that the $63,000 level corresponds to the realized price by short-term holders, serving as support since mid-September.

Additionally, capital inflow into Bitcoin ETFs remains significant, albeit decreasing. According to Farside Investors, Bitcoin ETFs recorded net inflows of $494.4 million last Friday, including $203.1 million for Ark Invest’s ARKB ETF and $123.6 million for Fidelity’s FBTC.

Although Bitcoin is experiencing a period of volatility, many analysts maintain a long-term optimistic perspective. On-chain data indicates that investors continue to accumulate BTC by transferring them from exchange platforms to private wallets, a behavior generally interpreted as a sign of lasting confidence.

IntoTheBlock highlights another potentially bullish factor: the increasing demand for Bitcoin in decentralized finance. Currently, 1% of the total Bitcoin supply is locked in DeFi protocols, thus reducing available liquidity in spot markets and potentially exerting upward pressure on prices.

In this uncertain economic context, investors need to remain vigilant. Bitcoin may experience further fluctuations in the short term before potentially resuming an upward trajectory in the long term.