Bitcoin traded lower on Tuesday, October 26. The BTCUSD pair fell 4.36% to $59,817. During the North American session, buyers tried to bounce off the $61,700 support level, but failed. Near the close, sellers broke through $61,700, triggering a cascade of stops on long positions below that level.
By the time the price retraced from $62,773 to $61,700, buyers had almost no chance to resume their ascent. Strong US data came out yesterday. US consumer confidence rose unexpectedly in October and US new home sales soared 14% in September.
Major currencies plunged against the dollar on the news. The S&P 500 also declined after reaching a new all-time high. Notably, the external backdrop for risk-sensitive assets shifted. Early in the morning, negativity rolled in from China and the US, which had a negative impact on risk appetite. The dollar rose again against rival currencies, including Bitcoin.
Chinese authorities told China Evergrande Group Chairman, Hui Ka Yan, to use his personal assets (over $7 bln) to pay off creditors and alleviate the deepening debt crisis. The authorities made it clear that they were not going to pull him out of the debt hole. Investors believe that his property is illiquid. The news exerted an adverse impact on Asian stocks, with the Hang Seng Index tumbling 1.83% to 25,577.
Stateside, the Federal Communications Commission (FCC) on Tuesday revoked its license for a division of China Telecom, one of the China’s top three telecom providers. The FCC claimed that “China Telecom Americas’ ownership and control by the Chinese government raise significant national security and law enforcement risks”. It is believed that the United States took such a step because of Taiwan.
Sellers achieved their goal. On Wednesday, during the European session, the price fell to $58k. In total, buyers liquidated $626 mln worth of positions. On the daily TF, the technical picture looks bearish. Buying activity has decreased markedly. In 2017, when Bitcoin CME futures were launched, the Bitcoin price turned lower. Coinbase was floated on the Nasdaq and the market sank. Bitcoin ETF was approved, and the market turned down again. Clearly there are many factors impacting the market, but after a key event the correction tends to be about 80%.
By the time of writing, the BTCUSD pair was trading at $59,050. Sellers look poised to push the price action down to $55,300. To remind, on October 29 Evergrande will end its grace period for interest payment. A distressed developer for sellers is like a red rag for a bull. In order for buyers to quell bearish sentiment, they will need to close the day above $61k.
Gains in the dollar are capped by the falling UST yields. The situation on the debt market is uncertain ahead of the FOMC meeting. If today us macro data disappoint investors, there will likely be a chance for a rebound to $61k, or alternatively, a cascading decline to $55k.