The price of Bitcoin abruptly dropped 4% from the day’s peak as the uncertainty in the stock market intensified.
The price of Bitcoin (BTC) abruptly dropped 4% from the day’s peak on Oct. 30 as the uncertainty in the stock market intensified. With five days left to the U.S. presidential election, Bank of America (BofA) suggested a 20% drop is possible.
The Dow Jones Industrial Average (DJIA) declined 7.55% since Oct. 12. Tech-heavy stock indices performed slightly better in the same three weeks as the Nasdaq dropped 5.8%.
While the correlation between Bitcoin and stocks has declined in recent weeks, the slump of risk-on assets could negatively affect cryptocurrencies.
Would a “risk-off” drive hurt Bitcoin in the short term?
According to BofA economists led by Michelle Meyer, the election result is not the biggest threat to equities.
Rather, it is whether a contested election occurs that could cause the markets to rattle due to the uncertainty. The markets could still rally regardless of who wins the election. But a contested election may lead to a market slump. The economists wrote:
“Landslide victory for either Trump or Biden and rapid election conclusion would likely be welcomed by markets while a severely contested election could see risk-off and drive 10-year rates materially lower.”
For Bitcoin, it is still difficult to gauge whether a potential prolonged equities dump would cause a pullback.
Since Oct. 12, while U.S. stock market indices declined by 5% to 6%, Bitcoin rallied by nearly 16%. In the last 18 days, BTC rose from $11,167 to $13,290, massively outperforming gold, stocks and the U.S. dollar.
But, the confluence of Bitcoin facing a multiyear resistance level at $14,000 and the lack of certainty around risk-on assets could slow BTC’s momentum.
In the near term, as Cointelegraph reported, $13,000 serves as a large whale cluster. This means high-net-worth buyers would likely protect $13,000 as a key support area. Since $14,000 was the previous top for Bitcoin in mid-2019, the new range would likely be found $13,000 to $13,900.
If the market uncertainty persists after the election, there is a higher probability that it would place BTC in the low $13,000 region for a prolonged period, which wouldn't necessarily be unhealthy.
"A correction wouldn’t necessarily be unhealthy for the Bitcoin market at this point, as that may lead to further accumulation," explained Cointelegraph Markets analyst Michael van de Poppe in his latest Bitcoin price technical analysis. He added:
"The majority of the investors definitely want to see a straight line toward $200,000, but that’s simply not happening."
This means max pain for altcoins
Throughout October, alternative cryptocurrencies have found themselves in an awkward position alongside rising BTC dominance. When Bitcoin increases so fast in a short period, it could hinder the altcoin market’s recovery because it creates a volume vacuum.
According to researchers at Santiment, the sentiment around Bitcoin has strengthened in recent weeks and months. Consequently, the Bitcoin dominance index has consistently increased, dwarfing both major and small-cap cryptocurrencies. They said:
“As would be expected with $BTC's increased #crypto market dominance, sentiment has grown more positive and dwarfed other large cap assets. Weighted social sentiment measures the positive/negative ratio of comments about assets, while also including volume.”
from Cointelegraph.com News https://ift.tt/2HKGs2c
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