Crypto, Stocks Fall as Traders Pivot: How Low Can Bitcoin Go?

Global financial markets are facing a broad sell-off this week as appetite for risk assets, including crypto and stocks, begins to wane.

Bitcoin dipped below the historic $100,000 level on Tuesday, while the S&P 500 index and gold fell 3% and 10% from their respective peaks. On Wednesday, Bitcoin fell to an intraday low of $99,110 before recovering slightly, marking a 21% drop from its October peak, CoinGecko data shows.

The broader crypto market capitalization fell to $3.44 trillion, its lowest level in four months. The sale is also on $2 billion in liquidations across digital assets, the second consecutive day of a major setback in leverage.

Regardless of the key catalysts driving sales or how good the network’s fundamentals are, the critical question for investors is how much more prices could decline from here.

Ryan Yoon, Senior Research Analyst at Tiger Research, expects Bitcoin to hold $98,000 and maintain its price of $200,000 in the long term.

The decline reflects a fundamental change in market dynamics, particularly risk aversion, said Tim Sun, Senior Researcher at HashKey Group. Decrypt.

“Bonds were the only asset class to post significant gains, while most risk assets – including Bitcoin, gold and stocks – saw broad pullbacks,” he said. “Although negative pressure persists, the $85,000 level remains a strong support zone for Bitcoin.”

“The strength of the USD may be one of the main driving forces behind the fall in the market price,” said Jiehan Chen, Operations Onboarding Lead Analyst at Schroders. Decrypt.

Other experts said that a strengthening of the US dollar is a key pressure point for risk assets denominated in dollars.

Sun also pointed to signs in short-term funding markets, including widening spreads and increased use of the Fed’s Standing Repo Facility, alongside a US Treasury account that has exceeded $1 trillion, effectively draining liquidity from the system.

The tightening of the liquidity environment has amplified fears and uncertainty due to the ongoing shutdown of the US government, which is likely to extend until December.

On the Myriad prediction market, owned by Decrypt’s Dastan parent company, users place a 98.7% chance that the ongoing government shutdown will be the largest in US history.

While the government shutdown raises fears, Derek Lim, Head of Research at Caladan, said Decrypt that tight liquidity is amplified ongoing sales.

Data Onchain

While the sentiment has become very negative, the data on the chain reveals a more nuanced picture.

“Bitcoin’s latest drop below $100K is mainly driven by sentiment,” with the Fear & Greed Index falling to 21, according to verified analyst CryptoQuant XWIN Research.

U place highlights that the network’s key fundamentals remain strong, with hash rates near all-time highs and $10.7 billion in stablecoins flowing into Binance, potentially serving as dry powder for future purchases.

Despite Bitcoin’s fall below $100,000, “social data indicates that there are still a lot of confidence buying drops,” chain analytics platform Santiment noted on Wednesday. tweetredoing the takeover of XWIN Research.