Bitcoin Plunges as Global Markets Grapple with Uncertainty

Major markets are in the red today, including bitcoin. Bitcoin's price has dropped to around $13,184, indicating a bearish signal. Ether options traders have shown a preference for calls over puts in the past month, suggesting a bullish sentiment for the cryptocurrency. The decline in bitcoin's price has been attributed to investors shedding higher-risk assets amidst concerns about the global economy and uncertainty surrounding the US presidential election.

Bitcoin Takes a Hit as Global Markets Reel from Uncertainty

Amidst a sea of red in major markets, Bitcoin has taken a tumble, losing 3.6% over the past 24 hours to hover around $13,184 as of 20:00 UTC (4 p.m. ET). This setback comes as investors shed riskier assets, with global equities and risk assets alike suffering losses.

Adding to the bearish sentiment, Bitcoin remains below its 10-day and 50-day moving averages, a technical indicator often viewed as a sign of weakness. The price dip began on Wednesday, reaching a low of $12,894 around 14:00 UTC (10 a.m. ET), but has since recovered slightly.

Katie Stockton, technical analyst at Fairlead Strategies, attributes the decline to a "risk-off" day, where investors sought to reduce exposure to assets perceived as higher risk, including cryptocurrencies. "Bitcoin is seeing a retracement of its strong up move as risk assets trade off sharply," she explained.

The Nikkei 225 in Asia closed with a 0.30% loss, weighed down by rising coronavirus infections and uncertainty surrounding the U.S. presidential election. The FTSE 100 in Europe ended the day 2.5% lower as new lockdown restrictions sparked sell-offs. In the United States, the S&P 500 fell 2.9% as concerns over the global economic outlook intensified amid rising coronavirus cases worldwide.

Despite the current setback, Stockton maintains a bullish outlook for Bitcoin. She believes that despite the recent correction, the cryptocurrency still has a strong chance of surpassing its 2019 price high. "The recent breakout above the August high lends a bullish intermediate-term bias," she said. "Uncertainty is taking its toll on the markets, but we think it will be short-lived."

Neil Van Huis, director of institutional trading at Blockfills, highlights the significant drop in Bitcoin's mining hashrate, a measure of computing power used to mine Bitcoin, to levels not seen since June. This decline, primarily due to older, inefficient machines being turned off, presents an opportunity for investment in newer mining rigs. "This is good for mining companies," Van Huis said. "It also comes at a time when prices are rising. With that comes more investment into the space like JPMorgan and PayPal. That should, in my opinion, keep prices bullish, especially now that we cleared that $12,000-$12,500 hurdle for a bit."

In the futures market, institutional interest on CME remains strong, with open interest surpassing $800 million on Tuesday. "Futures contracts trading at a premium to spot prices even as the October CME expiry is fast approaching this Friday," noted Denis Vinokourov, head of research at Bequant.

Guy Hirsch, U.S. managing director at eToro, views the current market volatility as a positive factor for Bitcoin. "The election outcome might produce a shift from a pro-business administration into an administration that is much more skeptical about free markets" just as COVID-19 cases hit record levels, he said. "We could be in for a long winter that may see bitcoin potentially challenge its previous record high set back in 2017."

Ether Options Skew Towards Calls

Ether, the second-largest cryptocurrency by market capitalization, has also experienced a slight decline on Wednesday, currently trading around $384 and seeing a 5.6% loss over the past 24 hours as of 20:00 UTC (4:00 p.m. ET).

The ether options market has exhibited a preference for calls over puts in recent times. On Deribit, the largest ether options venue, 55% of trades have been calls compared to 44% puts over the past month, according to Genesis Volatility.

While this trend does not necessarily indicate a clear price direction for ether, it suggests where liquidity is concentrated. "Seeing more activity on the call side indicates that the call legs have the most liquidity and active participation," said Greg Magadini, CEO of Genesis Volatility. "This is useful for traders to know when structuring less liquid multi-legged trades."

Other Markets

Digital assets listed on the CoinDesk 20 generally experienced losses on Wednesday, with Bitcoin Cash (BCH) emerging as a notable exception, gaining 2.6%. Other significant losers included 0x (-8.3%), Chainlink (-5.9%), and Orchid (-5.7%).

In commodities, oil prices fell 4.3%, with the price per barrel of West Texas Intermediate crude dropping to $37.26. Gold also dipped by 1.6% to $1,877 as of press time.

U.S. Treasury bond yields displayed a mixed performance, remaining nearly flat overall. The 10-year bond yield rose the most, climbing by 0.44% to 0.773.