Cryptocurrency Majors Drop 5% Amid Profit-Taking; Gold Retreats
Major cryptocurrencies experienced a notable decline, starting the week down by around 5%. This trend marks a continuation of a challenging October for the cryptocurrency market, which is facing its worst performance since 2015.
Cryptocurrency Market Overview
Bitcoin hovered around $106,000 on Monday morning, following a brief surge past $110,000 last week. Among the significant losers were Dogecoin and Cardano’s ADA, both dropping 5%. Other noteworthy cryptocurrencies, including Solana (SOL), BNB, and Ethereum (ETH), saw declines of up to 4%. However, Tron (TRX) remained stable over a 24-hour period.
Market Sentiment and Trends
The recent downturn appears to be driven by profit-taking among investors. Analysts noted that a lack of fundamental support has contributed to the negative sentiment. Alex Kuptsikevich, chief market analyst at FxPro, commented on Bitcoin’s struggle to maintain levels above $113,000, indicating weakening market momentum. He mentioned, “The market continues to trace lower highs, but the $3.5 trillion total market capitalization zone has attracted dip-buyers.”
Despite recent challenges, trading volume for October exceeded $300 billion, indicating robust liquidity in the market. Long-term holders have been selling their Bitcoin, with sales by these investors tripling since June. Many are capitalizing on favorable prices, particularly after entering the market around $93,000.
Gold Market Dynamics
In parallel, the gold market saw prices stabilize at around $4,000 per ounce after an earlier decline. This shift was prompted by China’s recent decision to eliminate tax rebates for certain gold retailers. This policy change might impact gold demand within one of the largest bullion markets globally.
Implications for Gold Demand
The adjustment in tax policy removes value-added tax offsets for gold sold from the Shanghai Gold and Futures exchanges. Despite this pullback, gold prices remain over 50% higher year-to-date, reflecting strong demand amidst ongoing macroeconomic and geopolitical tensions. The remarkable October rally in gold prices had started losing steam even before this announcement from Beijing.
Correlation Between Bitcoin and Gold
The relationship between Bitcoin and gold has evolved, with both assets increasingly reacting to changes in monetary policy and global uncertainties. The Federal Reserve’s decision to pause interest rate hikes, alongside expectations of lower capital costs, could eventually rekindle investor interest in risk assets. For now, traders are balancing safety and speculation as market conditions fluctuate.
