3 reasons why Bitcoin price failed to break $37K

On Nov. 10, Bitcoin (BTC) experienced a surge in value, taking it above $37,000, only to suffer a correction and fall back to around $35,000 on Nov. 13. This sudden shift in price caused the liquidation of $121 million worth of long futures contracts. On Nov. 14, BTC stabilized at around $35,800, leading investors to question the reasons behind this downturn.

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U.S. inflation, gov’t shutdown impact on BTC price

The recent softening of U.S. inflation data on Nov. 14, as reflected by the Consumer Price Index (CPI) which showed a 3.2% increase in October compared to 2022, led to a decrease in yields on U.S. short-term Treasurys, which in turn triggered buying activity in traditional assets. This may have reduced the demand for alternative hedges such as Bitcoin. If the Federal Reserve’s strategy to curb inflation is successful without causing a recession, Bitcoin may lose some of its appeal as a hedge.

Moody’s rating agency further lowered its outlook on the U.S. credit to negative from stable on Nov. 11, but this did not have a positive effect on Bitcoin and other alternative hedges. Instead, investors sought refuge in short-term 5.25% fixed-income instruments, which may explain why gold struggled to surpass $2,000 despite escalating debt levels and global economic challenges.

China’s October retail sales data indicated a 7.6% increase, the fastest since May. Nevertheless, this apparent recovery hides underlying issues, such as a 9.3% decline in property sector investments in the first 10 months of the year. The economic stimulus measures implemented by China, including policy support and liquidity injections, have had only modest effects.

Considering that China is the world’s second-largest economy, its economic situation may contribute to investors’ cautious stance on riskier assets such as Bitcoin, especially when considering the global economic context. Furthermore, recent political developments concerning potential U.S. government shutdowns may also affect Bitcoin’s performance.

The U.S. House of Representatives passed a bill on Nov. 14 to keep the government operational through the holiday season, avoiding a fiscal crisis. However, this measure sets the stage for possible spending disputes in the coming year, including a provision to cut federal spending by 1% across the board in 2024 if no agreement is reached.

Spot Bitcoin ETF expectations, regulatory scrutiny

The cryptocurrency market experienced a negative reaction to a fraudulent BlackRock XRP trust filing on Nov. 13. This event, although not directly linked to Bitcoin, has drawn regulatory scrutiny to the crypto sector at a time when numerous spot Bitcoin ETF applications are awaiting review by the U.S. Securities and Exchange Commission (SEC).

On Nov. 13, Bloomberg ETF analyst James Seyffart emphasized that approval for a spot Bitcoin ETF should not be expected before January. This statement came amid heightened market anticipation surrounding upcoming SEC decisions scheduled for Nov. 17 and Nov. 21.

The false BlackRock XRP trust filing initially sparked hopes for an XRP (XRP) spot exchange-traded fund (ETF) in the U.S., however, the $9 trillion asset manager swiftly dismissed the claim. Despite the parties involved, the outcome still represents a net positive for the cryptocurrency market.

Heightened fear of global economic recession

The recent drop in Bitcoin’s price, which had been hovering around the $37,000 level, is likely the result of multiple factors. Investors may have reassessed their positions, taking into account Bitcoin’s substantial $725 billion market capitalization, which is slightly lower than Berkshire Hathaway’s valuation of $760 billion despite generating profits of $76.7 billion in the past year.

Bitcoin’s monetary policy of scarcity and predictability is a contrast to the strategies employed by major global corporations, which can repurchase their own stocks using earnings, thus reducing the available supply. In addition, these trillion-dollar companies can leverage their strong balance sheets during economic downturns to acquire competitors or expand their market dominance.

Ultimately, Bitcoin’s challenge in maintaining momentum above $37,000 is influenced by factors such as data supporting the Federal Reserve’s strategy for a soft economic landing and concerns over global economic growth. These elements continue to create an unfavorable landscape for Bitcoin’s value, especially if the SEC delays decisions on spot BTC ETFs, as expected by the market.

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