Bitcoin prices slid Monday ahead of an election that will shape its bias for the rest of the year.
The benchmark cryptocurrency plunged 2.7 percent following its best month in more than a year. Futures tied to the BTC/USD pair also inched lower by 1.27 percent, pointing to a declining institutional interest in the cryptocurrency after it ventured into overbought territory last week.
The Bitcoin CME Futures’ daily Relative Strength Index was 76.5 on October 27. Technically, that amounted to a counteracting bearish correction below 70 – a borderline level that separates the asset from ‘overbought’ to ‘neutral.’
And that happened after Bitcoin breached above $14,000. The level served as an ideal ceiling for traders to offload a portion of their bullish positions for short-term profits. Two bullish rejections later, the price corrected lower towards $13,356 on Monday.
Bitcoin experiences sell-off at $14,000. Source: BTCUSD on TradingView.com
The latest plunge in Bitcoin prices also appeared as traditional markets showed signs of recovery from their weekly lows. Futures tied to the S&P 500, the US benchmark index that has shown an erratic positive correlation with Bitcoin since March 2020, rose 1.6 percent in the pre-trading session Monday.
Gold, a hedging asset that rivals Bitcoin, also climbed 0.62 percent.
Sean Markowicz, a strategist at Schroder Investment Management, told the WSJ that investors were buying assets that closed last week in the red.
“We could see some buying back, with some investors seeing this as a buying opportunity given the huge sell-off that we had last week,” he explained.
The upside in traditional markets also appeared just a day before the US election. A new Wall Street Journal/NBC News poll showed that Joe Biden is leading Donald Trump by ten percentage points. Investors hope that a clear win for Mr. Biden would clear the way for the second coronavirus relief package. This bill stands at an impasse amid failed negotiations between the Republicans and the Democrats.
As reported earlier, the presence of a stimulus package could prove bullish for Bitcoin as it would increase downside pressure on the US dollar. The cryptocurrency remains inversely correlated with the greenback, especially since the March 2020 global market rout.
Bitcoin Technical Outlook
AMD Trades, a crypto-analysis channel based out of Twitter, noted that Bitcoin might have lost a portion of its gains to alternative cryptocurrencies. The last 24 hours mainly shows an uptick across the altcoin market, with Ethereum, XRP, and other tokens, rising against Bitcoin.
— AMD Trades (@Amdtrades) November 2, 2020
That somewhat shows that capital is not flowing out of the cryptocurrency market. Traders are visibly shuffling their Bitcoin funds ahead of the election results.
A pseudonymous daytrader, meanwhile, expects the Bitcoin price to go lower towards $11,500.
“If we are to continue with the sell-off, I would expect the red box to hold as resistance given its importance as support on LTF ($11,650),” he said. “Looking to be a buyer at $11,500.”
Bitcoin was trading at $13,287 at the time of this writing (1248 UTC).