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Bitcoin catches global market flu; falls after a month's hot rally

Bitcoin catches global market flu; falls after a month's hot rally

Bitcoin catches global market flu; falls after a month's hot rally
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By Yashi Gupta  Oct 29, 2020 3:18:24 PM IST (Published)

The spiraling pandemic and Washington's failure to reach a deal on new fiscal stimulus before the November 3 election drove all three stock indexes to close more than 3% lower in heavy trade.

Bitcoin's searing rally dampened on Wednesday amid investors rushing to look for safe havens. After climbing more than 20 percent in the past month, the cryptocurrency's price started to wobble and it has fallen around 4 percent in the last 24 hours.

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Bitcoin had roughly gained some 15 percent after Paypal's encouraging announcement that it will allow cryptocurrency buying, selling and shopping on its network.
However, the value of BTC fell 3.33 percent to $13,166.25 on Wednesday. Litecoin and Monero also dropped, while the Bloomberg Galaxy Crypto Index dropped 3.7 percent.
According to market analysts, the risk-aversion trading session has triggered a widespread panic selling in every risky asset, be it gold or bitcoin.
Markets worldwide have been on edge due to rising coronavirus cases slowing down the global economy and the looming possibility of a contested US presidential election next week.
Global markets
The Dow closed at lows last seen in late July, 3.43 percent, while S&P 500 fell 3.53 percent, and the NASDAQ composite dropped 3.73 percent.
However, even as the week started and investors bailed out of equity markets, bitcoin continued rallying — adding more than 25 percent in a month after being almost stagnant in the summer.
This latest surge was on the backs of payments giant, PayPal, announcing its users to buy and sell bitcoin and other cryptocurrencies.
Now, the digital currency has started to wobble again as all the three US stock indexes closed more than 3 percent lower in heavy trade.
Fall anticipated?
However, some of the bitcoin traders were already anticipating this fall.
Their attention was on the 60,000 bitcoin options that are due to expire on October 30. This event alone would send some $750 million shocks through the increasingly unstable looking bitcoin market.
Bitcoin Options Market
Like any other options market, the bitcoin options market lets the traders bet on what they expect the future price of the digital currency.
This market has significantly expanded this year, adding a staggering amount of $1 billion in the last month. According to Skew, a bitcoin and crypto market analysis company, this market's total valuation is now a massive $2.5 billion.
Add to it the expiry of $750 million, and you get a recipe for a market disaster.
When the options expire, the traders either get a payout or lose their stake.
What analysts say
Bitcoin advocates are asserting that this decline might not be a cause of concern.
Some chartists say that the currency is merely taking a breather after being overbought since its 14-day relative strength passed 70.
Cryptocurrencies like Bitcoin stand to benefit in an era of rampant money printing and inflationary spikes. Something major has to happen for the Bitcoin rise to stop; otherwise, it has no other option but to rise, Bloomberg Intelligence analysts noted.
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