October Drop Marks First Loss Since 2018

Being the most actively used digital currency on the planet, Bitcoin dropped by up to 5% at the end of October. In this monetary framework, this was the first loss that it incurred monthly within a month since 2018 by the cryptocurrency. 

The crash marks the end of a seven-year period where it had been traditionally considered a favourable time of the year in the life of Bitcoin investors. 

This volatility in the asset has been seen to increase over the past few weeks, which can be explained by the existence of a great deal of global economic uncertainty and an overall risk-averse perspective on demand, with the given market existing in a risk-off state.  

What Went Wrong in October?

The observed sell-off in October was worsened by the biggest cryptocurrency liquidation recorded, caused by news of a 100% tariff on Chinese imports, and possible limitations on big software export by the President Donald Trump. 

This political action geopolitically stirred one of the greatest responses in several fields of assets. On the other hand, Bitcoin dropped by a record high value of close to $126,000 to about $104,783 on October 10-11, thus justifying the returns made in a period of few days.  

The latest sell-off has highlighted the nature of Bitcoin as a relative concentration asset, as featured mostly by Bitcoin and Ethereum as reported by Adam McCarthy, senior analyst at the company according to Kaiko, a digital market data company. 

In turbulent times, these assets can be drawn down by 10% or more in a few minutes. Indicatively, despite the recent gold and equities all-time highs and the combined history of strong correlation between the two asset classes, broad-based hesitations on the part of investors diminished capital incentive to divert their funds in any substantial measure between cryptocurrency assets and equities.  

Market Skepticism and Greater Good

The uncertainty in the world monetary policy continues to create a panic among investors. The inability of the government to stand caused by conservatives and Republicans has pushed out the publication of vital economic reports. 

Thus, continuing with the doubt in the equity and digital property markets and heightening the turbulent situation following the miscalibration of market estimations by the U.S. Federal Reserve on the decrease in interest rates ahead.  

Such a fearful atmosphere has been enhanced by top monetary authorities: JPMorgan Chase Chairman Jamie Dimon issued a personal warning that there is a high likelihood of a massive market correction in six months to two years further fueling the concern of the valuations that are already at an extremely high level.  

Bitcoin Annualized Performance and Future

Bitcoin has gained almost 16% in the first half of 2020 notwithstanding a sharp drop in October, supported by the pro-cryptocurrency tendencies of the Trump government. 

• The success of such high-profile cases (especially those which are dismissed against key cryptocurrency platforms operators), along with the instability of the systematic regulatory measures, has also contributed to the increased investor confidence in such a government regime.
• Macroeconomic signs, regulatory readability, and policy changes determine the future of Bitcoin.
• Money policy hesitation and geo-policy action could continue to drive the short-term volatility, but the long-term institutional involvement and benignity on the part of the regulations may promote the recovery in the post-crisis as the economic market is favourable again.
• Monetary policy developments ought to be followed by the investors with regulatory developments regarding digital assets.

Resilience in history indicates the possibility of a recovery of the Bitcoin after the corrective sessions; however, it is crucial to stay cautious in an environment as drastically complicated and dynamic as the financial sphere.