The same attitude that is driving demand for stocks continued to grip digital assets on Tuesday, causing Bitcoin (BTC) and other cryptocurrencies to fall. This sentiment is driving demand for equities. As Bitcoin continues to move lower than the significant $20,000 barrier, market observers are keeping a close eye on where prices may bottom out.

Bitcoin Stock Decline

Over the course of the previous day, the price of Bitcoin has decreased by 1%, falling below $19,100. The most prominent cryptocurrency is currently firmly located at the lower half of the $19,000 to $24,000 range that has dominated since a selloff that occurred in the middle of June, and a move below $19,000 would bring it near to annual lows that are around $18,500.

“There has been a drop in Bitcoin’s price as a result of its inability to break $20,500. According to Joe DiPasquale, CEO of BitBull Capital, a company that manages cryptocurrency assets, “now the bulls will need to defend $19,500 in order to keep hopes of a rally alive.” “In the event that the support fails, we can consider $19,000 and down as potential destinations. However, due to the release of CPI data this month, greater volatility is anticipated.

A carefully monitored indicator of inflation, the consumer price index for the United States was released on Thursday, and it showed that prices have reached their highest levels in forty years. In a concerted effort this year to bring inflation under control, the Federal Reserve has substantially increased interest rates, further tightened financial conditions, and so increased the likelihood of a recession while simultaneously lowering the level of demand for risky assets.

Cryptocurrencies have grown increasingly associated with stock prices, and their value has been dropping in unison with the Dow Jones Industrial AverageDJIA +0.12% and the S&P 500 indexes. This is occurring against the background of a macroeconomic environment that is increasingly pessimistic. Despite the fact that part of this link disappeared in September — in addition to the relative volatility of Bitcoin – digital assets continue to experience the same rough ride as the stock market, with economic variables such as inflation and the employment report acting as important triggers.

“The risk-aversion of recent days hasn’t been ideal for Bitcoin either,” said Craig Erlam, an analyst at broker Oanda. “The cryptocurrency has slipped back below $20,000 and is struggling to turn its fortunes around,” said Craig Erlam. “The risk-aversion of recent days hasn’t been ideal for Bitcoin.” “We’ve grown accustomed to these changes, and the most recent decline has been proceeding at a rather slow rate.” At this point, there have been no significant failures of the technological support, so I can’t think that anyone is freaking out. After Thursday, we will, of course, check to see if the same holds true.

However, despite the fact that Bitcoin is expected to react to the CPI data that will be released on Thursday, it is also probable that any volatility will be rather mild — a far cry from the days of swings of double digits that many crypto holders are accustomed to. Bitcoin’s price ultimately fluctuated between $19,000 and $20,000 despite the fact that September was the worst month for the Dow and the S&P 500 since March 2020. This occurred despite the fact that September was the worst month for Bitcoin since March 2020.

Analysts at the cryptocurrency research firm Kaiko stated in a report that “Bitcoin has scarcely budged,” with 30-day volatility decreasing 10 points over the month of September. “Crypto’s abnormally low volatility is a big contrast to what traditional markets are now experiencing. Bitcoin, in particular, has largely bucked the risk-off selloff, despite the fact that its correlation with the S&P 500 continues to be significantly positive.”

Having said that, there is a school of thought among market watchers who believe that the current lack of volatility is a portent of an important market event that will occur in the near future. This story was given more credence by indications that traders were flooding into positions in crypto derivatives. The Bitcoin perpetual futures market is now the most liquid market for Bitcoin. Therefore, these futures helped provide credence to the thesis. When the market shifts in either direction, price fluctuations in crypto derivatives that are generally traded with leverage, also known as borrowed money, can become even more extreme.

According to the analysts working for Kaiko, “Both Bitcoin and Ethereum open interest on the largest derivative exchange Binance has increased to all-time highs,” which indicates that new money is entering the cryptocurrency markets despite the fact that there is still a lot of uncertainty. The total number of open derivatives contracts is what is meant by the term “open interest.”

Ether, the second most valuable cryptocurrency, fell by 2% to a price of $1,275 despite Bitcoin’s continued strength. The value of lesser-known cryptocurrencies or altcoins, such as Solana, fell by 4%, and CardanoADAUSD –4.83% 5% of its value was lost. Memecoins were not spared, with Dogecoin and Shiba InuSHIBUSD –4.84% both lost 3% of their value.

 

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