24.10.2021

Reasons for the collapse of the price of bitcoin: the fall of the stock market and the strengthening of the dollar

At the beginning of the week, trading in the US stock market started with the fall of the leading industry indicators. Following the risky assets, Bitcoin (BTC) began to lose positions quickly.

Analysts associate the fall in the price of BTC with an unexpected pullback in the stock market caused by a massive outflow of capital from risky instruments.

According to Valkyrie Investments CEO Lee Wald, the sell-off in the digital asset market was expected. Cryptocurrency traders began to go into the cash because of the fear that the stock market will update the lows following today’s trading.

As soon as capital begins to return to risky assets, digital currencies can quickly recoup, the analyst predicts.

Over the past two days, the largest cryptocurrencies have lost 10-20% of their value. Bitcoin has set an intraday low below $ 42,500, thus surpassing the September 7 crash and leveling with the first half of August. On the morning of September 21st, the fall continued and BTC was currently dropping to $ 41,600 – a level that has already twice protected it from a deeper fall this month.

Ether fell below the psychologically significant mark of $ 3,000, Solana lost 12.5% ​​in value, Polkadot – 14.5%, and Avalanche – over 15%.

Reasons for the collapse in the crypto market

Bitcoin continues to decline following other markets, said Vitaly Kirpichev, Development Director at TradingView in Russia. A similar trend can be observed in the US stock market, in the foreign exchange market for the EUR / USD pair and oil.

Affects the significant strengthening of the US dollar to all assets in which it is expressed, the expert said. European stock indices also experienced a strong fall. For example, the Stoxx Europe 600 index was down 2.1% (the highest drop since July 19), the German DAX fell by a record 2.2% in two months.

“Market participants are betting on the speedy curtailment of monetary stimulus to the US economy, therefore they are restructuring their long-term portfolios. We can find out about the approximate dates on Wednesday, when the two-day Fed meeting ends. Until that day, nervousness in the markets may persist, ”Kirpichev predicted.

At the moment, the BTC rate is influenced by two factors: the risks of an investigation by the US Commodity Futures Trading Commission (CFTC) in relation to Binance and the crypto exchange’s suspicions of market manipulation, as well as the second package of infrastructure assistance to the economy planned by the US Congress, the amendments of which imply taxation of crypto projects, the presenter noted. analyst at 8848 Invest Viktor Pershikov.

Late last week, two Bloomberg sources reported that the CFTC suspects Binance of conducting its own trades based on customer orders before they are executed. At the same time, no official accusations were made.

This year, the crypto exchange has faced pressure from financial regulators. For example, at the beginning of the month, the Singapore authorities listed Binance as a company that may violate local laws. And in the summer, she stopped trading cryptocurrency derivatives in Europe, and some of the products of the trading platform became unavailable to residents of South Korea and Malaysia.

Investors are waiting for signals from the Federal Reserve. In the middle of the week, the American regulator is to announce its further actions in the financial sector. The two-day Fed meeting kicks off today, September 21.

Volatility may escalate towards the end of this week, when the September expiration of bitcoin futures and options takes place.

The decline in the crypto market is associated primarily with macroeconomic factors. On Friday, the S&P 500 closed 1% lower than its 50-day moving average, and less than 75% of its stocks closed above their 200-day moving average. As noted by Yahoo! Finance, this share was the lowest in the last 10 months and marks the end of the fourth longest winning streak since at least 1928.

At the same time, Bitcoin’s 30-day correlation with the S&P 500 was at one of the highest levels since last October:

The financial markets continue to discuss the debt crisis of the Chinese company Evergrande. Meanwhile, its effects are already beginning to be seen in neighboring real estate and banking companies.

Thus, shares of the Chinese developer Sinic Holdings fell 87% during trading today, China Merchants Bank fell 9.3%, and the Hang Seng real estate index, which is one of the most important on the Hong Kong Stock Exchange, fell 6.7%. Evergrande’s own stocks are hitting 11-year lows, down another 15% in the last session.

As Mattie Beckink of the Economist Intelligence Unit notes, the potential collapse of Evergrande will have “far-reaching financial implications.”

“Evergrande is reported to owe money to 171 domestic banks and 121 other financial firms,” she added.

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