Why did the price of Bitcoin fall today? ScrgruppEn

The price of Bitcoin (BTC) reversed sharply a day after retesting the $28,590 level, its highest level in two months.

What is driving the price of Bitcoin down?

As of October 3, Bitcoin’s price was around $27,390, down more than 4% from the previous day. The cryptocurrency’s decline on the daily chart was accompanied by rising trading volumes, indicating bearish sentiment among traders.

BTC/USD hourly price chart. Source: Trading View

The following factors appear to be responsible for Bitcoin’s poor performance over the past 24 hours.

US bond yields rise

High US bond yields have significantly impacted Bitcoin price performance.

On October 3, the yield on 10-year US Treasury bonds rose to 4.75%, the highest level in sixteen years. This came after Federal Reserve officials reminder Markets in which interest rates will not fall in 2023 and 2024.

10-year US Treasury bond yield. Source: Trading View

In theory, higher yields increase the opportunity cost of holding Treasuries, which in turn benefits the US dollar’s standing against the world’s top foreign currencies. Therefore, it is not surprising that on October 3, the US Dollar Index (DXY) rose to its highest level since November 2022.

A strong dollar has been a downtrend for Bitcoin throughout 2023, with its reversal clearly visible in the chart below.

DXY vs. BTC/USD weekly price chart. Source: Trading View

Overbought correction

From a technical perspective, Bitcoin’s decline was almost expected due to the overbought Relative Strength Index (RSI).

On October 2nd, BTC’s four-hour (4-hour) Relative Strength Index (RSI) crossed above 70 to reach the highest overbought levels in over a month. An overbought RSI is usually followed by a period of correction or consolidation, indicating a lack of buyers at higher price levels, as shown below.

BTC/USD 4-hour price chart showing Relative Strength Index (RSI) signals in the overbought zone. Source: Trading View

In addition, analyst Rekt Capital Argues The sell-off in BTC prices appeared alongside the 2019 pre-halving fractal, as shown below.

BTC/USD weekly price chart. Source: TradingView/Rect Capital

The fractal predicts that Bitcoin’s price will fall for another 28 weeks until it halves before bouncing towards a new record high.

Long liquidations exceed Bitcoin short trades

Bitcoin’s price decline was accelerated by prolonged liquidations that overwhelmed short trades.

Closing out a long position requires a person to sell the underlying asset to protect themselves from possible further declines. As a result, long liquidations in the derivatives market force the asset price to fall further when combined with selling pressures in the spot markets.

The past 24 hours saw about $23 million worth of long liquidations versus more than $5 million in short liquidations, according to CoinGlass.

Heatmap of cryptocurrency liquidations over the past 24 hours. Source: Coinglass

Long liquidations coincide with lower financing rates as well. However, funding is still above zero, i.e. holders of long positions are still paying for short positions, suggesting that the market is still bullish overall.

BTC OI Weighted Funding Rate. Source: Coinglass

Bitcoin technical analysis

Bitcoin technicals also indicate a potential bearish bias with a classic bearish reversal pattern emerging on the daily chart.

A so-called rising wedge is formed when the price bounces within a range defined by two converging upward trend lines. As a rule of technical analysis, this pattern is resolved after the price breaks below the lower trend line and declines with a length equal to its maximum height.

BTC/USD daily price chart showing rising wedge breakout setup. Source: Trading View

Therefore, the bears will try to pull Bitcoin price towards the lower trend line of the wedge near $26,800, a level that coincides with the cryptocurrency’s 0.236 Fibonacci line, as well as its 50-day (red) and 200-day (blue) Exponential Moving Averages (EMAs). . .

Related: Bitcoin Analysts Still Expect BTC Price to Collapse to $20K

A break below the lower trend line could see a drop towards $24,000 in the next few months, a target that is about 12% below current price levels.

Conversely, a bounce before or after testing the lower trend line of the wedge could see Bitcoin test the upper trend line near $28,400, in conjunction with the 0.5 Fib line.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, so you should do your own research when making a decision.

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