Bitcoin Slides Toward $81,000 as Oil Above $110 Revives Rate-Hike Bets
Key Takeaways
- •Bitcoin dropped nearly 4% in 24 hours on Thursday, reaching an intraday low of $81,331 after approaching $85,000 the previous day.
- •The decline was triggered by an oil price surge stemming from Middle East conflict, which heightened U.S. inflation concerns and the prospect of additional Federal Reserve rate increases.
- •Houthi attacks on Saudi Arabia pressured equities as markets feared oil supply disruptions and a broader regional war.
- •Bitcoin has historically declined during war headlines and performed strongly in low-rate, high-liquidity environments, often moving in step with tech stocks.
- •Despite Thursday's fall, bitcoin recorded its best quarter in years, and analysts consider it to be in a bull market after moving above its 365-day moving average.
Bitcoin fell on Thursday, giving back the gains it had built earlier in the week after oil prices surged.\nThe largest cryptocurrency was down nearly 4% over a 24-hour period in New York on Thursday, touching an intraday low of $81,331 at one point.
Only a day earlier, bitcoin had been closing in on $85,000 as investors piled back into technology stocks following Elon Musk's SpaceX earnings.
The renewed selling pressure came after conflict in the Middle East pushed oil prices higher, stoking inflation fears in the United States. A surging oil price can — at least in the short term — weigh on bitcoin and other "risk-on" assets, because it raises the likelihood that the U.S. central bank will lift interest rates.
Bitcoin has historically performed well in periods of low interest rates, when liquidity is abundant, and has at times moved in step with tech stocks and the Nasdaq.
Equities also slid on Thursday after Yemen's Houthis carried out further attacks on Saudi Arabia, fueling fears of oil supply disruptions and a wider Middle East conflict.
Bitcoin has typically come under downward pressure on news of war and has rallied on hopes of a ceasefire. When the U.S. and Israel first attacked Iran in February, the coin nosedived, and it remained shaky amid war headlines in March and April.
Rising oil is also feeding what many politicians describe as an affordability crisis in the U.S. Americans will go to the polls on November 3, and surging inflation is one of the hottest campaign topics. The Federal Reserve has said bringing inflation down in the world's largest economy is its top priority.
Despite Thursday's dip, bitcoin just posted its best quarter in years, and analysts have said the asset is now in a bull market after climbing above its 365-day moving average, a long-term trend gauge that tracks the coin's average price over the past year.
Last month, bitcoin shrugged off the Federal Reserve raising interest rates as well as lawmakers blocking landmark crypto legislation, the Clarity Act, a bill aimed at setting clearer rules for digital asset markets.
Oil prices, Middle East tensions, and the Fed's inflation fight are therefore the developments to watch as bitcoin's macro backdrop evolves heading into the November 3 vote.
This article first appeared on Bitcoin Magazine and was written by Mathew Di Salvo.
