Bitcoin (BTC) price fell sharply 4% from October 30 high as uncertainty on the stock market increased. With five days to go before the US presidential election, Bank of America or BofA suggested that a 20% drop is possible.
The industrial average Dow Jones lost 7.55% from October 12th. High-tech stock indices performed slightly better than that in the same three weeks Nasdaq fell 5.8%.
While the correlation between Bitcoin and stocks has decreased in the past few weeks, lThe decline in risky assets could have a negative impact on cryptocurrencies.
Would “risk mitigation” harm Bitcoin in the short term?
According to BofA economists headed by Michelle MeyerThe election result isn’t the biggest threat to stocks.
It is rather the case that a controversial election could shake the markets due to uncertainty. Markets could still rebound regardless of who wins the electionHowever, a competitive choice can lead to a market crash. The economists wrote:
“A landslide victory by Trump or Biden and the quick conclusion of the election would likely be welcomed by the markets, while a highly competitive election could reduce risk and significantly lower 10-year rates.”
For bitcoin It is still difficult to assess whether a possible prolonged destocking would lead to a withdrawal.
While US stock indices have fallen 5% to 6% since October 12, Bitcoin is up nearly 16%. In the past 18 days, BTC rose from $ 11,167 to $ 13,290, significantly outperforming gold, stocks and the US dollar.
However, the confluence of Bitcoin with a multi-year resistance level of $ 14,000 and the lack of certainty about risky assets could slow the momentum of BTC.
In the short term, Cointelegraph reported, US $ 13,000 will serve a large group of whales. This means high net worth buyers would likely protect $ 13,000 as a key area of support. Given that $ 14,000 was the previous high for Bitcoin in mid-2019, The new range is likely to be between $ 13,000 and $ 13,900.
If market uncertainty persists after the elections, There is a higher chance that BTC will be placed in the low region of $ 13,000 for an extended period of timewhich wouldn’t necessarily be unhealthy.
“A correction at this point would not necessarily be detrimental to the Bitcoin market as it could lead to further accumulation,” said the analyst from Cointelegraph Markets Michael van de Poppe in its latest technical analysis of Bitcoin prices. Added:
“Most investors definitely want a straight line towards $ 200,000, but that just doesn’t happen.”
Maximum pain for altcoins
Throughout October, alternative cryptocurrencies were in a tough spot alongside that growing dominance of BTC. When bitcoin rises so quickly in a short period of time, This could hinder the recovery of the altcoin market as it creates a volume vacuum.
According to researchers Santiment, The mood around Bitcoin has increased in the last few weeks and months. As a result, Bitcoin’s dominance index has steadily risen, dwarfing both large-cap and small-cap cryptocurrencies. Commented::
“As expected, given the increasing dominance of the US dollar cryptocurrency market, sentiment has turned positive and outperforms other large-cap assets. Weighted social sentiment measures the positive / negative ratio of comments to assets, taking volume into account. “