In recent weeks, Bitcoin price has experienced significant volatility, culminating in a notable drop below the $64,000 mark after a bullish attempt that saw it surge above $66k.
Notably, this decline, which has seen Bitcoin’s price tumble by over 3% in just 24 hours, can be attributed to a combination of factors, including a “long squeeze” in the perpetual futures market and growing concerns regarding potential interest rate hikes from the Bank of Japan (BOJ).
Japan’s new prime minister pick disrupts markets
Bitcoin’s price trend has been bullish, particularly following a rapid ascent of nearly 14% after the US Federal Reserve decided to cut rates by 50 basis points.
However, this bullish momentum was abruptly disrupted on September 30, 2024, by the unexpected selection of Shigeru Ishiba as Japan’s new prime minister, which reignited fears of BOJ tightening monetary policy.
Historically, the BOJ’s shifts towards higher interest rates have had adverse effects on risk assets, including cryptocurrencies.
The uncertainty surrounding Ishiba’s leadership and his supportive stance toward returning to a more normalized monetary policy has injected additional anxiety into the markets.
Following Ishiba’s selection, the Japanese yen appreciated, leading to a 5% decline in the Nikkei stock index, which further contributed to downward pressure on Bitcoin (BTC) and other risk assets.
Besides the fears of a BoJ rate hike, the Bitcoin selloff can also be linked to a “long squeeze” in the futures market, which has resulted in approximately $49 million in liquidations.
Data from CryptoQuant indicates that the futures market had become overheated, with open interest surpassing $18.4 billion.
Source: CryptoQuant
Such conditions have historically been precursors to significant price drops.
As a result, Bitcoin price experienced a swift decline, dropping from around $66,000 to $63,186 at press time.
Overbought conditions
The Bitcoin price drop also coincided with overbought conditions within the market.
Analysts have noted that perpetual funding rates for Bitcoin futures have reached levels reminiscent of those preceding the substantial selloffs in late July and August.
This overextension in the market has left Bitcoin vulnerable to a correction, particularly in light of the broader market’s cautious sentiment regarding global equities.
Source: Coinglass
Bitcoin price prediction amid current pullback
Despite the current turbulence, some market analysts remain optimistic about Bitcoin’s long-term trajectory.
Matthew Hyland, a prominent analyst, expressed confidence in Bitcoin’s potential for recovery, even if short-term price corrections occur.
He indicated that if Bitcoin can close a week above $65,000, it would create a higher high and higher low for the first time in over six months, signaling a potential trend shift.
If #Bitcoin closes the weekly above $65k we will have established a higher-high and higher-low for the first time in 6+ months and established a trend change
Dips going forward would be opportunity and bias must shift to bullish
Anything pullback $52.6k is just a higher-low
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Moreover, with October on the horizon, often referred to as “Uptober” in the crypto community, there is hope for Bitcoin’s resurgence.
Additionally, Bitcoin’s supply in profit remains consistently above 80%, a key indicator of a bull cycle.
Source: CryptoQuant
However, looking ahead, as we move into October, several key economic reports and central bank discussions loom on the horizon.
Investors will be closely monitoring upcoming US manufacturing and service sector reports, as well as the highly anticipated September jobs report, which could significantly influence the Federal Reserve’s rate decisions in November.
Currently, markets are leaning towards a 25 basis point rate cut, following the Fed’s unexpected 50 basis point cut in September that triggered the recent Bitcoin bull run.
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