Bitcoin Decline Intensifies: Liquidations, U.S.-China Tensions, and Broader Market Implications

Bitcoin (BTC) remains locked in a downward spiral, pressured by extensive liquidation events and mounting trade tensions between the U.S. and China. Over the past week, Bitcoin has experienced a significant drop, shedding 10% of its value amidst market-wide turbulence.

As of 8:25 a.m. on October 16, Bitcoin was priced at 169 million won on South Korea’s Upbit exchange, marking a 0.63% dip compared to 9 a.m. the previous day. In parallel, Bitcoin fell 2.19% to $110,866 on Binance, one of the leading global exchanges. The CoinDesk20 index, which gauges the performance of the top 20 cryptocurrencies, reflected this broad decline with a 3% downturn during the same timeframe. Ethereum (ETH) slid 3.71% to $3,980.98, while XRP (XRP) dropped 3.79% to $2.41, underscoring the pervasive bearish sentiment across digital assets.

Massive Liquidations Heighten Selling Pressure

Fresh data from Coinglass illustrates the scale of recent liquidation events. Over the past 24 hours, approximately $87 million (equivalent to 122 billion won) worth of Bitcoin positions were liquidated, with 68.5% originating from long (buy) positions. Across the wider cryptocurrency spectrum, total liquidations reached a staggering $285 million (about 399 billion won).

Within the last trading session, Bitcoin’s price hovered near $113,000 in the early hours, remaining within a tight range. However, by noon, selling pressure intensified, pushing Bitcoin below $112,000. Despite a brief rebound to the mid-$113,000 range by 5:30 p.m., bearish sentiment prevailed, leading to successive breaks below crucial support levels at $113,000, $112,000, and $111,000.

Analysts Retain Optimism for Long-Term Growth

While the immediate outlook for Bitcoin appears bleak, analysts have identified critical resilience in its ability to stay above the $110,000 threshold despite headwinds. This, coupled with macroeconomic factors, positions Bitcoin for potential recovery.

Quinn Thompson, Chief Investment Officer at Lecar Capital, expressed measured optimism: "Bitcoin has a chance to mirror gold's momentum in the coming months. If historical trends from previous bullish cycles in October 2023 and November 2024 reoccur, we could see a significant uptick."

Matt Mena, a researcher at 21Shares, added, "The growth in Bitcoin ETF inflows and dovish expectations surrounding monetary policies are bolstering structural demand for Bitcoin. With sustained buying interest, Bitcoin could rally to the $150,000 mark by the end of the year."

Federal Reserve Policy: A Key Catalyst for Price Movement

Bitcoin’s trajectory remains closely linked to the Federal Reserve’s fiscal moves, and recent developments have offered mixed signals. On October 15, the Fed’s Beige Book reported that labor demand had softened slightly, despite job levels remaining generally stable. Fed Chair Jerome Powell also hinted at possible interest rate cuts during the upcoming Federal Open Market Committee (FOMC) meeting, scheduled later this month. Speaking at a Philadelphia conference on October 14, Powell noted, "While unemployment remains low, the rate of job growth is slowing."

Market participants are weighing these dynamics carefully. A report from QCP Capital stated, "After a period of heightened weekend volatility, risk assets like Bitcoin are regaining stability. Although Bitcoin has corrected 10% from its recent highs, prospects of rate cuts and ETF demand are fostering a positive backdrop for recovery." Notably, the correlation coefficient between Bitcoin and gold has surged past 0.85, signaling that the two traditionally disparate assets are now trading in tandem, potentially pointing to early signs of a rebound.

Investor Sentiment Under Pressure as Uncertainty Prevails

Amid this price turbulence, investor sentiment in the crypto market has waned sharply. Alternative’s Fear & Greed Index, a prominent barometer of market mood, fell to 30 (Fear) on the day, notably lower than the previous session. The index operates on a scale where lower values signal heightened selling pressure and uncertainty, while higher values reflect growing buying appetite and optimism.

As Bitcoin continues to navigate volatile waters, investors and analysts are closely monitoring pivotal macroeconomic indicators, institutional inflows, and the broader global financial landscape. With liquidation events still exerting downward pressure and rising concerns surrounding trade tensions, the coming months will be crucial in determining whether Bitcoin can reclaim bullish momentum or remain in a prolonged corrective phase.