Why is Bitcoin price down today?

After breaking above $21,500 on November 4, Bitcoin (BTC) price fell 14% to a new annual low of $17,166 on November 8, and most altcoins followed suit.

While news of Binance and FTX initially led to a rally in the market, the day turned south as various unconfirmed sources speculated that FTX’s losses could mean a $6 billion deficit.

The price drop breaks Bitcoin’s short-term correlation with the stock market, with the tech-heavy Nasdaq down just 0.32%, while the Dow Jones gained 0.48% on investor optimism about the Nov. 8 U.S. midterm elections.

Amid the current volatility, $614 million in BTC lengths are at risk of liquidation, and more than $224 million were liquidated on November 8. The fear for many is that the FTX situation will become more acute if Binance’s offer to buy the exchange is not resolved. a selloff in the market could trigger a cascade of liquidations and send the BTC price to new lows.

BTC long vs. short vs. cancellations. Coinglass

Let’s explore the main reasons why Bitcoin price is falling today.

FTX surrenders after investors fear a bank will lose its liquidity

Bitcoin price is reacting to the stress placed on the market by FTX, reaching a yearly low after a period when many thought the bottom of the bear market had been found.

The May 2022 Terra Luna explosion and the recent collapse of LUNA Classic created the first 7-week losing streak in Bitcoin history. The market draws parallels between the current FTX bank, the perceived large budget gap and what happened with Terra Luna earlier this year.

Rising interest rates in the US and abroad are affecting the price of Bitcoin

According to the Consumer Price Index Report, inflation in the US increased by 0.6% in September compared to the previous month.

The Consumer Price Index report, the most-watched barometer of inflationary pressures in the US, rose 8.2% in September from a year earlier, slightly more than the 8.1% analysts had predicted.

With the upcoming CPI reporting event on November 10, Bitcoin saw a volatile 12% drop in 24 hours and hit 2022 record lows.

Bitcoin price index. Source: Cointelegraph

Suppression of retail and institutional flow

While the number of consumers investing in cryptocurrency will increase dramatically in 2021, retail traders looking to cash in on these shifts have a huge impact on prices. And since June, bitcoin has mostly been stuck in the $18,000-$21,000 range after falling to an all-time high of $68,000 in November 2021. A break from the all-year lows may not be of immediate interest to investors.

According to independent market analyst Jaran Mellerud, Bitcoin’s on-chain activity has been down for the entire year. Coinbase’s trading volume nearly halved to $217 billion in the second quarter.

Between mid-June and mid-July, Binance reported a 50% decline in volume, while Kraken and Gemini reported 75% and 80% declines, respectively.

Binance US was a notable exception, reporting a 2% decline after it suspended Bitcoin trading fees in June.

FTX witnessed a run on the bank, seeing a net outflow of $1.1 billion in the first week of November.

FTX output diagram. Source: DuneAnalytics

Related: Why is the cryptocurrency market down today?

Is there a chance that the Bitcoin price will change course?

Short-term uncertainties in cryptocurrencies do not seem to have changed the long-term outlook of institutional investors. According to Robin Vince, CEO of BNY Mellon, 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 them have cryptocurrency in their portfolios, and about 75% are actively investing in digital assets or considering doing so.

Concerns about the potential bankruptcy of FTX are clearly influencing the price of Bitcoin to hit new yearly lows.

In the long term, market participants still expect the price of Bitcoin to rise, especially as more banks and financial institutions convert to the digital currency for settlement purposes.