Why Is Bitcoin Price Down Today?

After topping the $21,500 mark on November 4, Bitcoin (BTC) price is down 14% on November 8, hitting a new yearly low of $17,166 and most altcoins are following suit.

While the Binance and FTX news initially caused a rally in the market, the day turned south as various unconfirmed sources speculate that FTX’s loss could show a $6 billion shortfall.

This price decline breaks Bitcoin’s short-term correlation with the stock market, with the tech-heavy Nasdaq down just 0.32%, while the Dow Jones gained 0.48% on investor optimism about the Nov. 8 US midterm elections.

Against the background of the current volatility, $614 million in BTC loans are at risk of liquidation with over $224 million liquidated on November 8th. The fear for many is that if the FTX situation is not resolved by Binance’s bid to buy the exchange, a sharper selloff in the market could trigger a liquidation cascade and send the BTC price to new lows.

Let’s examine the main reasons why the Bitcoin price is down today.

FTX capitulates after investors’ fear of a bank run undermines liquidity

Reacting to the stress on the FTX market, Bitcoin price hit a yearly low after a period where many thought the bottom of the bear market had been found.

May 2022, the Terra Luna implosion and the ultimate collapse of LUNA Classic produced the first 7-week losing streak in Bitcoin history. The market is drawing parallels between today’s FTX bank run, the large budget gap experienced and what happened to Terra Luna earlier this year.

Rising interest rates in the US and abroad are weighing on the Bitcoin price

Based on the Consumer Price Index Report, US inflation increased by 0.6% in September compared to the previous month.

The Consumer Price Index report – the most widely followed barometer of inflationary pressures in the US – climbed 8.2% in September compared with the same month a year ago, slightly more than the 8.1% predicted by experts.

With the upcoming CPI reporting event on November 10, Bitcoin saw a volatile 12% drop in 24 hours, hitting record lows for 2022.

Suppressed inflows from retail and institutions

While the number of consumers investing in crypto increased dramatically in 2021, prices are heavily influenced by retail traders looking to cash in on these shifts. And since June, Bitcoin has been flat, mostly staying in the $18,000 to $21,000 range after falling from its November 2021 all-time high near $68,000. Going below the all-year low may not immediately provoke investor interest.

According to independent market analyst Jaran Mellerud, Bitcoin’s chain activity has been down for the entire year. Coinbase’s trading volume in the second quarter fell by about half to $217 billion.

Between mid-June and mid-July, Binance reported a 50% drop in volume, while Kraken and Gemini saw 75% and 80% drops respectively.

Binance US was one notable exception, reporting a 2% reduction after halting Bitcoin trading fees in June.

FTX has witnessed a run on the bank, seeing a net outflow of $1.1 billion in the first week of November.

Related: Why is the crypto market down today?

Is There a Chance of Bitcoin Price Reversing?

The short-term uncertainties in cryptocurrencies do not seem to have changed the long-term outlook of institutional investors. According to BNY Mellon CEO Robin Vince, a poll commissioned by the bank found that 91% of institutional investors were interested in investing in tokenized assets in the following years.

Around 40% of them already have cryptocurrency in their portfolios, and about 75% are actively investing in digital assets or considering doing so.

Concerns about FTX’s potential insolvency are clearly contributing to the Bitcoin price sweeping a new annual low.

In the long term, market participants still expect the price of Bitcoin to rise, especially as more banks and financial institutions appear to be turning to digital cash for settlement purposes.