Bitcoin experienced a 6% increase in price from October 1 to October 2. However, it failed to break the resistance at $28,500 and subsequently dropped by 4.5% on the same day. This decline was primarily influenced by the underwhelming performance of Ether futures exchange-traded funds (ETFs), which were launched on October 2. Concerns about an impending economic downturn also contributed to the price drop.
The correction in Bitcoin’s price on October 3 marked the 47th day since it last closed above $28,000. This correction led to the liquidation of $22 million worth of long leverage futures contracts. Before delving into the events that affected Bitcoin and the cryptocurrency market, it is essential to understand how the traditional finance industry has impacted investor confidence.
Investors have become increasingly expectant of further contractionary measures by the U.S. Federal Reserve following the release of the latest U.S. labor market data on October 3. 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 hinted at the possibility of a monetary policy response if the labor market’s tightness persisted. As a result, traders are now pricing in a 30% chance of a rate hike at the November Fed meeting, compared to 16% in the previous week.
On October 2, nine new ETF products designed to mirror the performance of Ether futures contracts were introduced to the market. However, these products experienced low trading volumes of under $2 million on their debut day. This underwhelming performance disappointed traders and fell short of expectations. In contrast, the ProShares Bitcoin Strategy ETF, which was launched in October 2021 during a thriving cryptocurrency market, witnessed a remarkable $1 billion launch. Despite this discrepancy, there is still uncertainty surrounding the likelihood and timing of the approval of Bitcoin spot ETFs by the U.S. Securities and Exchange Commission (SEC).
Regulatory pressure has also increased in the cryptocurrency industry, with Binance facing a class-action lawsuit. On October 2, a lawsuit was filed against Binance.US and its CEO Changpeng “CZ” Zhao, accusing them of unfair competition aimed at monopolizing the cryptocurrency market. The lawsuit alleges that CZ’s statements on social media were false and misleading, specifically claiming that Binance had sold its FTT token holdings before a prior announcement, causing the token’s price to decline. This legal case and the upcoming trial against Sam Bankman-Fried add to the ongoing speculation and concerns within the crypto community.
The decline in Bitcoin’s price on October 3 reflects not only the potential economic downturn but also the close correlation between cryptocurrency markets and macroeconomic factors. Furthermore, the exaggerated expectations for cryptocurrency ETFs indicate that the $28,000 level may not be the consensus among investors. The regulatory pressures and legal challenges, such as the Binance lawsuit, highlight the continuous risks present in the cryptocurrency space.
Disclaimer: This article provides general information and should not be considered legal or investment advice. The author’s views expressed here are their own and do not necessarily reflect those of Cointelegraph.