Bitcoin (BTC) experienced a 6% increase in price from October 1st to October 2nd. However, it failed to surpass the $28,500 resistance level, leading to a 4.5% drop on the same day. This decline can be attributed to the disappointing performance of Ether (ETH) futures exchange-traded funds (ETFs), which were launched on October 2nd, as well as concerns about a forthcoming economic downturn.
This correction in Bitcoin’s price on October 3rd signifies that it has been 47 days since Bitcoin last closed above $28,000. As a result, $22 million worth of long leverage futures contracts were liquidated. Before delving into the events impacting Bitcoin and the cryptocurrency market, let’s first try to understand how the traditional finance industry has influenced investor confidence.
The overheated US economy could lead to more Fed action
Investors have increasingly anticipated additional contractionary measures by the U.S. Federal Reserve following the release of the latest U.S. labor market data on October 3rd. The data revealed that there were 9.6 million job openings at the end of August, up from 8.9 million in July.
Federal Reserve Chair Jerome Powell had previously indicated during a speech at the Jackson Hole Economic Symposium in August that “evidence suggesting that tightness in the labor market is no longer easing could necessitate a monetary policy response.”
Consequently, traders are now pricing in a 30% chance that the Fed will raise rates at their November meeting, compared to 16% in the previous week, according to the CME’s FedWatch tool.
The Ether futures ETFs launch falls short
On October 2nd, the market witnessed the introduction of nine new ETF products specifically designed to reflect the performance of futures contracts linked to Ether. However, these products only saw trading volumes below $2 million on the first trading day, as of midday Eastern Time. Eric Balchunas, Senior ETF Analyst at Bloomberg, noted that the trading volumes fell short of expectations.
On their debut day, the trading volume of Ether ETFs significantly lagged behind the impressive $1 billion launch of the ProShares Bitcoin Strategy ETF. It is worth noting that the Bitcoin futures-linked ETF was introduced in October 2021, during a flourishing cryptocurrency market.
This occurrence may have dampened investors’ outlook on the potential inflow after an eventual Bitcoin spot ETF. Nevertheless, there remains uncertainty regarding the probability and timing of these approvals by the U.S. Securities and Exchange Commission (SEC).
Regulatory pressure mounts as Binance faces a class-action lawsuit
On October 2nd, a class-action lawsuit was filed against Binance.US and its CEO, Changpeng “CZ” Zhao, in the District Court of Northern California. The lawsuit alleges unfair competition aimed at monopolizing the cryptocurrency market by harming its competitor, the now-defunct exchange FTX.
The plaintiffs claim that CZ’s statements on social media were false and misleading, particularly since Binance had sold its FTT token holdings before the announcement on November 6th, 2022. The lawsuit asserts that CZ’s intention was to drive down the price of the FTT token.
The criminal case against Sam Bankman-Fried will begin on October 4th in New York. Despite CZ’s denial of unfair competition allegations, speculation within the crypto community continues to circulate regarding this matter.
BTC’s correlation to traditional markets seems higher than anticipated
The decline in Bitcoin’s price on October 3rd appears to reflect concerns about an impending economic downturn and the potential response of the Federal Reserve’s monetary policy. Furthermore, it demonstrates how closely cryptocurrency markets are intertwined with macroeconomic factors.
The elevated expectations for cryptocurrency ETFs also suggest that the $28,000 level may not be a consensus among investors, given the regulatory pressures and legal challenges, such as the class-action lawsuit against Binance. These factors underscore the ongoing risks within the cryptocurrency space.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Image Source: Pierre Borthiry – Peiobty@Unsplash
