The cryptoactives market has faced a sharp drop in recent days and has caused concerns among investors about a possible end to the recent cycle of rallies.
On December 4, Bitcoin dropped more than 20% and registered a low of US$ 42,000, which generated a flurry of liquidations of positions long in the futures market. The drop is more than 38% if we compare from the top of early November, when Bitcoin recorded a new high at $69,000.
But what could have caused this downward movement? That’s what we’ll analyze next, pointing out four potential reasons.
See too: https://webitcoin.com.br/btc-e-eth-implodem-o-mercado-cripto-cai-7-03-dez/
SEC Rejection of a Physical Bitcoin ETF
Despite the approval of Bitcoin ETFs that use futures contracts, one of the reasons for the pause in optimism may have been due to the disapproval by the SEC (Security and Exchange Commission) of physical Bitcoin ETFs, including that of the American manager VanEck, whose request was refused by the American regulatory agency.
During November, Joe Biden’s proposed $1 trillion infrastructure project was approved, which includes language applicable to cryptoactives and tightens the rules for passing on information from cryptoactive companies to the Internal Revenue Service, the US Federal Revenue.
In addition, the question of how the stablecoins, an instrument increasingly used for financial transactions, will be dealt with by regulators.
These points show that there is still a long way to go for the cryptoactive market to gain greater regulatory confidence.
The large number of futures contracts outstanding in the last week may also have contributed to the drop, as more than $1 billion were settled in a few hours.
The reset of leveraged positions generates an abrupt directional movement, which increases the potential for falls and causes distortions in the price of assets, which start to show disproportionate movements.
The Fed’s Change of Speech on Inflation
The Fed’s discourse in relation to inflation conditions is something that has drawn the attention of the entire financial market, which is looking for more concrete signals regarding the level of adjustment of the monetary policy that should actually be applied.
Until a few months ago, Jerome Powell was talking about the transience of inflation, but last week he emphasized that inflation levels are high and that perhaps the tapering (withdrawal of economic stimulus) has to be accelerated.
This led the market to the perception that an increase in interest rates could be imminent in the coming months, but it is unclear at what level.
The rise in the US interest rate could be detrimental to risky assets, including crypto-assets, as it makes US fixed income investment more attractive.
All attention will be focused on the last FOMC meeting, between the 14th and 15th of December, where the FED members will decide the direction of the interest rate.
Although it is not possible to say which of these reasons actually led to the drop in prices, it is important to keep them in mind, as they are some of the main reasons. drivers that may influence the cryptoactives market in the coming months.
By Ayron Ferreira | CNPI Analyst 2824