Bitcoin is experiencing a significant decline, rekindling investor concerns. After coming close to $66,000 last week, its price fell to $62,501 this Tuesday, a drop of 5.3%.
The catalysts for an unexpected decline
This sudden decline has its origins in several key factors. Firstly, the statements of Jerome Powell, chairman of the American Federal Reserve, dampened market enthusiasm.
During a speech in Nashville on September 30, Powell tempered expectations for interest rate cuts, forecasting only two cuts of 25 basis points each by the end of the year.
This prospect has caused an adjustment in market expectations. According to the CME FedWatch Tool, the odds of a 50 basis point rate cut in November increased from 53% last Friday to 38.2% after the Remarks by Powell.
Furthermore, the escalation of tensions in the Middle East has accentuated investors' risk aversion, weighing on volatile assets like Bitcoin.
A bitcoin market that demonstrates its resilience
Despite this decline, several indicators suggest underlying resilience of the Bitcoin market. Data from CryptoQuant reveals that the $63,000 level is the price realized by short-term holders, serving as support since mid-September.
Additionally, the inflow of capital into Bitcoin ETFs remains significant, although declining. According to Farside Investors, Bitcoin ETFs saw 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 going through a period of volatility, many analysts maintain an optimistic long-term outlook. On-chain data indicates that investors continue to accumulate BTC by moving it from exchanges to private wallets, a behavior generally interpreted as a sign of lasting confidence.
IntoTheBlock highlights another potentially bullish factor: the growing demand for Bitcoin in decentralized finance. Currently, 1% of the total Bitcoin supply is locked in DeFi protocols, reducing available liquidity in spot markets and potentially putting upward pressure on prices.
In this uncertain economic context, investors must remain vigilant. Bitcoin could experience further short-term fluctuations before potentially resuming a long-term upward trajectory.
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