Bitcoin (BTC) experienced a significant drop below $35,000 following the opening of the Wall Street market on November 2nd. This decline was primarily attributed to concerns over overheated derivatives. Cointelegraph Markets Pro and TradingView data revealed a retreat in BTC price, causing it to lose the ground it had gained overnight.
Prior to this decline, Bitcoin had reached new highs of $35,968 on Bitstamp, but it began consolidating shortly after. These highs were influenced by positive remarks made by Jerome Powell, Chair of the United States Federal Reserve. Powell’s speech indicated that interest rate hikes might come to an end. During the latest meeting of the Federal Open Market Committee (FOMC), the Fed chose to maintain the current interest rates.
According to a press release accompanying the FOMC meeting, recent indicators suggested a strong expansion in economic activity in the third quarter. While job gains had slowed down, they remained strong, and the unemployment rate remained low. However, inflation continued to stay high. The release also mentioned that tighter financial and credit conditions could negatively impact economic activity, hiring, and inflation, but the extent of these effects remained uncertain.
The $35,000 level quickly became a crucial support level for Bitcoin, as market participants strived to hold it. Additionally, the area above $34,500 was identified as an “ideal” target for a local low, as tweeted by cryptocurrency trader Michaël van de Poppe.
Despite reaching new highs, Bitcoin faced worries due to concerns over overheated derivatives markets. Charles Edwards, the founder of Capriole Investments, highlighted the overheating in Bitcoin derivatives markets, including Perps, Futures, and Options. He cautioned market participants to exercise caution during such periods. Another popular trader, Skew, also emphasized the significance of spot markets in supporting current Bitcoin prices and trends when derivatives markets heat up.
Material Indicators, a monitoring resource, echoed the need for caution in the current Bitcoin trading environment. Analyses of liquidity on the BTC/USDT order book on Binance suggested that support levels could disappear rapidly, resulting in what is known as a “rug pull.” At the time of writing, the liquidity support levels were found at $34,000 and $33,500.
It is important to note that this article does not provide investment advice or recommendations. Investors and traders should conduct thorough research and analysis before making any investment decisions.