The price of Bitcoin rose above $37,000 between November 10th and 12th, but faced a correction towards $35,000 on November 13th due to selling pressure. This unexpected movement triggered the liquidation of a $121 million long futures contract, and while the Bitcoin price settled around $35,800 on November 14th, investors started contemplating the factors underlying this decline.
Why is the Bitcoin Price Falling?
Some of the factors behind this movement were the unexpected release of US inflation data on November 14th. The US Consumer Price Index (CPI) increased by 3.2% compared to 2022, leading to a decline in short-term US Treasury yields.
This situation reduces the demand for alternative hedge instruments like Bitcoin, as it triggers buying transactions in traditional investment assets. If the Federal Reserve successfully lowers inflation without causing a recession in the markets, Bitcoin may lose some of its appeal as a hedge asset.
Even the downgrade of the US credit outlook from stable to negative by Moody’s on November 11th did not have a positive impact on Bitcoin and other alternative hedge instruments. Instead, investors explained why gold struggled to surpass $2,000 despite increased debt levels and global economic challenges by seeking refuge in short-term fixed-income instruments with a 5.25% yield.
Notable Developments in the World Economy
The retail sales data in China for October drew attention with the fastest increase since May, reaching 7.6%. However, this apparent recovery continues to conceal underlying problems, such as a 9.3% decrease in real estate sector investments during the first 10 months of the year. Economic stimulus measures, including policy support and liquidity solutions in China, have only provided modest benefits for the markets.
Considering that China is the world’s second-largest economy, the country’s economic situation prompts investors to remain cautious about riskier assets like Bitcoin. This becomes even clearer when viewed in the broader global economic context. Additionally, recent political developments regarding the threat of a US government shutdown could also affect Bitcoin’s performance.
On November 14th, the US House of Representatives temporarily prevented a financial crisis by passing a bill that would keep the government operational during the holiday season. However, this measure could pave the way for potential spending disputes next year, including a provision that would cut federal spending by 1% if no agreement is reached in 2024.
Despite these challenges, factors such as data supporting the Federal Reserve’s strategy for a soft economic landing and concerns about global economic growth continue to impact Bitcoin’s ability to sustain momentum above $37,000. These factors, especially if the SEC delays its decisions on spot BTC ETFs in line with market expectations, continue to paint a negative outlook for Bitcoin.
