Why Bitocion is falling today?

Key points:

• Given the current volatility, $614 million of BTC longs are at risk of liquidation, with more than $224 million in liquidations as of Nov. 8.
• In response to the pressure FTX exerted on the market, Bitcoin prices hit a yearly low.
• According to independent market analyst Jaran Mellerud, Bitcoin’s on-chain activity has declined throughout the year.
• With the upcoming CPI reporting event on Nov. 10, Bitcoin tumbled 12% in 24 hours.
• A survey commissioned by the BNY Mellon bank found that 91% of institutional investors are interested in investing in tokenized assets in the coming years.

After breaking above $21,500 on Nov. 4, bitcoin prices fell 14% to hit a new yearly low of $17,166 on Nov. 8 — most altcoins lagging behind.

While the Binance and FTX news initially sparked an uptrend in the market, the day turned south as various unconfirmed sources speculated that FTX losses could show a deficit of $6 billion.

The price drop shattered Bitcoin's short-term correlation with the stock market, with the tech-heavy Nasdaq down just 0.32%, while the Dow rose 0.48% on investor optimism over the Nov. 8 U.S. midterm elections.

Given the current volatility, $614 million of BTC longs are at risk of liquidation, with more than $224 million in liquidations as of Nov. 8. Many fear that if Binance’s proposed acquisition of the exchange fails to resolve the FTX situation, a more severe sell-off in the market could trigger a liquidation cascade and push BTC prices to new lows.

FTX capitulates after investor fears of bank run hit its liquidity

In response to the pressure FTX exerted on the market, Bitcoin prices hit a yearly low after what many believed to be a bear market bottom.

The Terra implosion in May 2022 and the eventual collapse of LUNA — since the rebranding to LUNA Classic (LUNC) — led to the first seven-week losing streak in Bitcoin’s history. The market is comparing the current FTX bank run and apparent budget shortfall to what happened with Terra earlier this year.

Curb the inflow of retail and institutional investors

While the number of consumers investing in cryptocurrencies in 2021 will increase dramatically, prices will be heavily influenced by retailers looking to monetize these shifts. Bitcoin has been flat since June, mostly stuck in the $18,000-$21,000 range after falling from an all-time high near $68,000 in November 2021. A dip below the yearly low may not immediately pique investor interest.

According to independent market analyst Jaran Mellerud, Bitcoin’s on-chain activity has declined throughout the year. Coinbase’s trading volume fell by about half to $217 billion in the second quarter.

Between mid-June and mid-July, Binance saw a 50% drop in volume, while Kraken and Gemini saw volumes drop by 75% and 80%, respectively.

Binance.US was a major exception, reporting a 2% drop after it stopped bitcoin transaction fees in June.

FTX rallied on the stock market, posting a net outflow of $1.1 billion in the first week of November.

Rising interest rates in the U.S. and abroad are weighing on Bitcoin prices

According to the CPI report, U.S. inflation rose 0.6% in September.

The Consumer Price Index report — the most closely watched barometer of inflationary pressures in the U.S. — rose to 8.2% in September 2022 from September 2021, slightly above the 8.1% forecast by experts.

With the upcoming CPI reporting event on Nov. 10, Bitcoin tumbled 12% in 24 hours, hitting a new all-time low for 2022.

Is there a chance for the Bitcoin price to reverse?

The short-term uncertainty surrounding cryptocurrencies does not appear to have changed the long-term outlook for institutional investors. According to BNY Mellon CEO Robin Vince, a survey commissioned by the bank found that 91% of institutional investors are interested in investing in tokenized assets in the coming years.

About 40% of these portfolios already have cryptocurrencies in their portfolios, and about 75% are actively investing or considering investing in digital assets.

Concerns that FTX could go bankrupt apparently helped push bitcoin prices to new yearly lows.

In the long run, market participants still expect bitcoin’s price to rise, especially as more banks and financial institutions turn to digital cash for settlements.