The price of Bitcoin suddenly fell by 3% in several hours alongside the U.S. dollar, gold and stocks as the outcome of the United States’ election is still up in the air.
Analysts are pinpointing the uncertainty surrounding the election as the catalyst for the sharp correction.
Why markets fell after surging during the vote count
When the mainstream media was actively reporting about the vote count, the price of Bitcoin and stocks rallied. Yet, after the vote count ended or the day, all risk-on and risk-off assets went into the red including S&P 500 futures.
Tracy Alloway, a financial journalist at Bloomberg and the co-host of Odd Lots, said it was likely due to President Donald Trump’s statement. She said:
“S&P 500 futures don’t like Trump’s suggestion that he’ll go to the supreme court to challenge election results. Now in the red.”
The recent drop of Bitcoin is noteworthy given that it dropped simultaneously with the dollar. Typically, when the dollar drops, Bitcoin and gold tend to rally, since both stores of value are priced against the dollar.
As Cointelegraph reported, BTC saw a low correlation with other assets, including stocks in recent weeks. As such, the collective correction among most major assets comes across as an unexpected market response.
What happens to BTC in the near term?
According to the data from CryptoQuant, the Estimated Leverage Ratio of Bitcoin futures on Binance hit an all-time high. This indicates that there are more traders in Binance’s BTC derivatives market than ever before.
Ki-Young Ju, the CEO of CryptoQuant, warned traders on Nov. 4 about heightened volatility caused by cascading liquidations. If there are an abnormally large number of contracts in the market, it can cause massive price movements.
In the short term, given the repeated rejection of BTC at $14,000, traders are leaning towards a market drop.
There are several key support levels in the foreseeable future for Bitcoin. First, the $13,300 area has been defended with strength over the past week. If BTC continues to hover above $13,300, it would indicate resilience from buyers.
Second, the $13,000 level has been supported with whale clusters since early November. This means whales accumulated large amounts of BTC at that level, which makes it an area of interest for buyers.