Bitcoin Below $80K: Is a Deeper Sell-Off Coming?

Bitcoin trades under pressure, falling for a sixth straight session and dropping below $80K amid caution ahead of key catalysts, including the Fed rate decision, U.S. inflation and GDP data and big tech earnings.

The largest cryptocurrency trades 0.5% lower over the past 24 hours at $79,500. Bitcoin has fallen 5% since its October 21 peak, putting the token on track for its second straight losing October, a month which has historically been one of the strongest for Bitcoin.

The risk-off mood has impacted not only Bitcoin but also broader risk assets, including U.S. stocks and, more specifically, U.S. tech stocks. The Nasdaq 100 trades 2.5% lower in October, its worst monthly performance since June, as investors fret over huge debt-backed spending on AI infrastructure and whether it can be justified by returns.

The Anthropic bounce was short-lived and excluded BTC

While Anthropic’s IPO filing yesterday brought renewed confidence to the AI trade, helping the Nasdaq close 0.8% higher, Bitcoin was largely excluded from that bounce in equities. The rebound in stocks was short-lived, with U.S. futures pointing lower today and tech once again leading the losses.

Concerns over stretched debt levels and spending in the AI sector remain firmly in focus. Anthropic's filing highlighted the steep costs associated with developing and scaling AI models. The company's net loss in the first half of this year surged to $80.7 billion, while revenue grew to $16.3 billion.

Megacap tech earnings from Alphabet and Microsoft tomorrow, followed by Amazon on Thursday, could provide more cues on the AI trade. This matters to BTC because the cryptocurrency is not only impacted by broader market sentiment, but the 30-day rolling BTC–Nasdaq correlation coefficient has also risen to 0.77, indicating a strong positive relationship between the two assets.

Fed rate decision and US data could be a headwind

The FOMC rate decision will be another key catalyst. The market is pricing in a 90% probability that the Fed will leave rates unchanged at 3.75%–4%. Therefore, the FOMC statement and comments from Fed Chair Kevin Warsh will be the main drivers. The market sees an 80% chance of a December hike.

U.S. core PCE, the Fed's preferred gauge of inflation, and U.S. GDP data later in the week could reverse or reinforce any reaction to the Fed decision. A hawkish hold and hotter-than-expected inflation could cement December rate hike expectations, putting Bitcoin and other risk assets under pressure. These assets often perform poorly in a higher interest rate environment due to reduced liquidity.

BTC ETFs remain negative in October  

Bitcoin ETFs started the week on the front foot. BTC ETFs recorded $110.3 million in net inflows on Monday, adding to net inflows last week of $304.7 million. However, this has so far been insufficient to flip October flows, which remain in the red with $202.1 million in net outflow. Persistent outflows could keep BTC under pressure.

Bitcoin forecast – technical analysis

From reaching an eight-month high of $87K, Bitcoin has been trending lower, breaking below its 50 EMA and the $80k psychological level. While the move lower lacks follow through so far, the RSI is below 50, keeping sellers hopeful of further downside.

Should selling pressure pick up below 80k, attention turns to the 100 EMA at $77.6K ahead of the 200 EMA at $76.3K. A break below this level could see sellers gain traction towards $70k.

Any recovery would first need to retake the 50 EMA at $80.7K before attention turns to $84,000, the mid-October resistance. It would take a rise above $87.4K to create a higher high and turn attention to $90,000. 

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