BTC price dips 3.5% as 'overheated' Bitcoin derivatives spark angst
Bitcoin experienced a decline in its price following the Federal Reserve's interest rate announcement, erasing more than $1,000 of the previously gained upside.
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The price of Bitcoin (BTC) dropped below $35,000 after the Wall Street opening on November 2, following concerns about overheated derivatives markets. This decline saw BTC trading at around $34,477. Prior to this drop, Bitcoin had reached new 18-month highs of $35,968 on Bitstamp, which came in response to positive comments from Jerome Powell, the Chair of the United States Federal Reserve, who hinted at the possibility of ending interest rate hikes.
The Federal Reserve had recently decided to keep interest rates unchanged during its latest meeting, emphasizing that economic activity was strong, job gains remained solid, and inflation was elevated. However, tightening financial and credit conditions were expected to affect economic activity, hiring, and inflation. The $35,000 price level had become a crucial support level for Bitcoin, while the range above $34,500 was considered an ideal target for a local low.
Despite the earlier gains, Bitcoin's price had dropped over $1,000 from its highs, leading to concerns, especially in the derivatives markets. Analysts warned that Bitcoin derivatives were overheated, and market participants needed to exercise caution. The focus was shifting towards spot markets to provide support for the BTC price. Additionally, analysis of the BTC/USDT order book on Binance showed that support levels could disappear rapidly, raising concerns about liquidity "rug pulls." At the time of writing, support levels were observed at both $34,000 and $33,500.
