Bitcoin dropped below $80,000 on Thursday, October 15, for the first time in more than a month, and forced position closures took $948 million from traders in a single day. Hot US inflation data set it off. Those holding leveraged long positions lost the most.
What moved the market on Wednesday and Thursday
Consumer price data landed on Wednesday: September inflation came in at 3.7% annually against a 3.6% forecast, with the core figure at 2.6% versus 2.5% expected. On Thursday the producer price index added to the pressure, rising 6.3% a year against a 5.5% forecast. To the market, that meant talk of another Fed rate hike had real ground under it.
Oil supplies a good share of the pressure. Brent trades near $104 a barrel, roughly 70% above a year ago, because of the war between the US and Iran. That hits fuel, shipping and nearly everything else that has to be moved to a buyer.
Higher rates push up Treasury yields. When a nearly risk free bond pays about 5%, Bitcoin is easier to sell than to hold. Credit also gets pricier, which hurts most the people trading with borrowed money.
Liquidations: who paid for the drop
According to CoinGlass, 177,440 traders were liquidated over 24 hours for a total of $948.22 million. Longs made up $858.96 million, or 90.6%. Holders of Ethereum positions lost the most ($282.03 million), with Bitcoin traders a little behind at just over $200 million.
It was the third heaviest day for long liquidations in the past 90 days. Only October 8 and August 22 were worse. The largest single order was closed on Binance, a $12.03 million long that was force sold at $80,208.96.
The rest of the market followed Bitcoin. Ethereum and XRP lost almost 5% each, Zcash sank nearly 10%, and only five coins in the top 100 gained more than 1%. The mechanics are simple, an exchange sells a position automatically once losses eat the collateral, and that selling pushes the price down and knocks out the next batch of longs.
ETF holders are underwater again
Bitcoin slipped about 2% below the average entry price of US spot ETF holders, which sits near $82,300. Since September 21 the funds closed above that line on 21 of 24 days. Those buyers are sitting on a loss again.
Inflows are not helping either. Last week $681 million left the funds, and the one strong inflow day brought in $177 million. Nexo analyst Iliya Kalchev reads the selloff as a broad exit from risk rather than a Fed story. Stocks and copper fell at the same time, gold rose, and South Korea's KOSPI lost about 8% on the week.
Since late September Bitcoin has traded in a range from $81,000 to $87,000 and now sits at its bottom edge. Glassnode calls $80,000 the level to watch.
Friday: Warsh gives no hint of a hike
On Friday the market caught its breath. Bitcoin bounced from $80,000 and traded near $82,000, while the KOSPI closed at 5,668, up 2% on the day but down 8.3% for the week. Fed Chair Kevin Warsh, speaking with IMF Managing Director Kristalina Georgieva, said nothing about further rate hikes.
"I don't prejudge meetings. I don't believe in saying now what I might do at the meetings that we have in the balance of this year."
- Kevin Warsh, Fed Chair, in a conversation with IMF Managing Director Kristalina Georgieva
Traders read it as a soft signal. CME FedWatch data showed the probability of a 25 basis point hike in October falling to 15% from 27% a day earlier. The US 10 year yield held at 5.07% after a brief jump to 5.13%.
The technical picture is plain. A hold above $81,603 opens the way to $84,245 and the $87,422 peak. If $80,286 goes, the next supports sit at $78,002 and $75,092. The RSI fell to 44, and the golden cross still protects the longer uptrend.
- On October 28 the Fed announces its rate decision.
- On October 29 core PCE inflation data arrives.
- On November 6 the October jobs report is due.
What has to change for a recovery
Kalchev names three conditions. They are steady ETF inflows, less selling from long term holders, and a Fed that stops at a single 25 basis point hike. For now Bitcoin holds above $80,000 on a bounce rather than fresh demand. The next three dates on the calendar will show whether that bounce is the start of a turn.
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