Bitcoin (BTC) recently surged above $37,000 between November 10 and 12, but then pulled back to $35,000 on November 13.
The sudden move triggered the liquidation of $121 million worth of long futures contracts, and while the price of Bitcoin stabilized at around $35,800 on November 14, investors are still pondering the underlying factors behind this downturn.
The impact of US inflation and government shutdown on Bitcoin price
Part of the catalyst behind this move was unexpectedly weak US inflation data on November 14th. US Consumer Price Index (CPI) October’s gain was 3.2% from 2022, causing U.S. short-term Treasury yields to fall.
This has triggered buying activity in traditional assets, potentially reducing demand for alternative hedging instruments such as Bitcoin. If the Fed succeeds in its strategy of curbing inflation without causing a recession, Bitcoin may lose some of its appeal as a hedge.
Even when Moody’s rating agency downgraded the U.S. credit outlook from stable to negative on November 11, it did not have a favorable impact on Bitcoin and other alternative hedging instruments. Instead, investors sought refuge in short-term 5.25% fixed income instruments, explaining why gold prices have struggled to break above $2,000 despite rising debt levels and challenges to the global economy.
In China, retail sales data for October showed growth of 7.6%, the fastest pace since May. However, this apparent recovery masks underlying problems, especially the 9.3% decline in investment in the real estate industry in the first 10 months of this year. China’s economic stimulus measures, including policy support and liquidity injections, have had only limited effect.
Given that China is the world’s second-largest economy, its economic conditions may lead investors to take a cautious stance against riskier assets such as Bitcoin, especially when considered within the broader global economic context. Additionally, recent political developments surrounding the threat of a U.S. government shutdown could also impact Bitcoin’s performance.
The U.S. House of Representatives passed a bill on November 14 to keep the government functioning during the holidays and temporarily avoid a fiscal crisis. However, the measure sets the stage for potential spending disputes in the coming year, including provisions for an across-the-board 1% cut in federal spending in 2024 if a deal is not reached.
Spot Bitcoin ETF expectations, regulatory review
On November 13, the cryptocurrency market reacted negatively to BlackRock’s XRP Trust fraudulent filing. Although it initially sparked hopes for XRP (XRP) spot exchange-traded fund (ETF) in the United States, the $9 trillion asset manager quickly dismissed the claim.
Although the incident is not directly related to Bitcoin, it has drawn regulatory scrutiny of the cryptocurrency industry at a sensitive time when numerous spot Bitcoin ETF applications await review by the U.S. Securities and Exchange Commission (SEC). Therefore, regardless of the parties involved, the outcome will be positive for the cryptocurrency market.
related: Tether attributes USDT growth to ETF excitement and emerging markets
On November 13, Bloomberg ETF analyst James Seyffart emphasize No spot Bitcoin ETF is expected to be approved before January. The announcement comes amid growing expectations for decisions by the U.S. Securities and Exchange Commission (SEC) scheduled for November 17 and November 21.
Concerns about global recession grow
Essentially, the decline in Bitcoin price after hitting the $37,000 level cannot be attributed to a single event. Considering Bitcoin’s market capitalization of $725 billion, investors may have re-evaluated their positions. By comparison, conglomerate Berkshire Hathaway is valued at $760 billion and had profits of $76.7 billion last year.
Bitcoin’s strict monetary policy ensures scarcity and predictability, but major global corporations can use the proceeds to buy back their own shares, effectively reducing the available supply. Additionally, during an economic downturn, these trillion-dollar companies can use their strong balance sheets to acquire competitors or expand their market dominance.
Ultimately, Bitcoin’s challenge to maintain momentum above $37,000 is influenced by factors such as data supporting the Federal Reserve’s economic soft landing strategy and concerns about global economic growth. These factors continue to create headwinds for Bitcoin’s value, especially if the SEC delays its decision on a spot BTC ETF in line with market expectations.
This article is for general information purposes only and is not intended to be, and should not be construed as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Svlook
