Bitcoin's Market Volatility Intensifies Amid Federal Monetary Policy Concerns
By: Eva Baxter
Recent fluctuations in Bitcoin's value have left investors and analysts scrambling to understand the market dynamics. On November 12, Bitcoin plummeted to $100,800, marking a 4.2% decrease in just 24 hours, only to recover later to $103,000. This significant drop resulted in over $610 million in liquidations of leveraged positions, with the crash intensifying during U.S. trading hours as major altcoins followed suit. The sell-off was partly driven by the strengthening of the U.S. dollar, which increased pressure on non-yielding assets such as Bitcoin ahead of the U.S. consumer price index release.
The Federal Reserve's interest rate cut odds have recently decreased, further influencing market uncertainty and reducing tailwinds previously supporting risk assets. The Polymarket odds indicate a 71% chance of a 25-basis-point rate cut, down from 90% in late October, as traders await further data on inflation to predict the Fed's next move. This macroeconomic backdrop has markedly affected crypto positioning, leading to defensive maneuvers in the market.
Derivatives markets have amplified the Bitcoin decline, with a pattern of thin liquidity creating volatile moves and stop-loss triggers exacerbating price drops. Following weeks of instability, the choppy trade environment and gradual rebuilds in leverage left the market vulnerable, resulting in significant sell-offs once selling pressure mounted. Ethereum, while experiencing slight gains, underperformed relative to Bitcoin, further reflecting cautious sentiment.
Amid this backdrop, Bitcoin Spot ETFs recorded net inflows of $524 million, a positive indicator following prior outflows, whereas Ethereum funds saw $107 million in net outflows, underscoring the fragile sentiment around ETH. The divergence in flows between Bitcoin and Ethereum places additional pressure on the broader market. Meanwhile, speculation over U.S. economic stability has intensified, with contrasting views on social platforms like X debating the impact of macroeconomic factors, such as the temporary resolution of the U.S. government shutdown, on Bitcoin prices.
Looking ahead, market participants remain cautious, needing clearer signals from both inflation data and the Fed's policy direction. Despite the recent downturn, Bitcoin maintains a position above crucial technical support levels, though liquidity remains thin and vulnerable to further leverage unwinds and sharp intraday price movements. Traders continue to navigate these turbulent waters, carefully monitoring for any potential rallies that may offer recovery opportunities.
