Pressure persists

After sinking perilously below $100K late Tuesday, Bitcoin has rebounded back above that key psychological threshold. As of Wednesday at 10:30 a.m. (EST), the largest, most closely followed crypto had shot back above $103K. That’s still about 1% lower than yesterday at this time. BTC is down 8% on the week.

Meanwhile, in a positive macroeconomic development, private companies added 42,000 jobs in October, more than the prior month and above consensus forecasts, according to the monthly ADP employment report. This regularly scheduled batch of jobs data normally takes a back seat to the Bureau of Labor Statistics’ monthly non-farm payrolls report. But that report won’t be released because of the government shutdown (CNBC).

CoinGecko charts testify to how at one anxiety-laden juncture last night Bitcoin sunk to $99,075.

Mercifully fleeting though that low ebb may have proven, it didn’t come without the usual glut of forced liquidations while macroeconomic pressure ulcers continued to manifest. The dollar stayed strong, global liquidity, weak. Tech stocks are under duress as the transformative AI thriller narrative is increasingly being subjected to a re-telling for these fraught times, with a spin that emphasizes AI firms’ soaring valuations and now fits more into the genre of horror-comedy. Indeed, the term “AI bubble” is being thrown around freely and frequently.

We put the question “is AI a bubble?” to a financially astute chatbot, Meyka. It spat out the following: “Investors who had poured heavily into companies tied to generative AI, machine-learning platforms and high-performance chips are now questioning whether the growth expectations built into prices are simply too optimistic. As they retreat, we see broader signs of risk-aversion returning to the markets.”

And so with Bitcoin falling by as much as 5% in a day, there was Ethereum dropping by as much as 10% to as low as $3,275, while Solana lost 8%. The total crypto market capitalization fell to $3.44T, its lowest level in four months.

“Risk-off sentiment took hold of financial markets, impacting a broad swath of digital assets, stocks, and commodities,” Gerry O’Shea, head of global market insights at Hashdex, told CoinDesk.

Ouch. Tuesday’s crypto market sell-off resulted in more than $2B in liquidations and marked the second straight day of leveraged positions spectacularly unravelling.

How much further could prices decline from here?

The downturn reflects a fundamental shift in market dynamics, with risk no longer sought out lustily but instead averted, significantly impacting Bitcoin, said Tim Sun, researcher at HashKey Group. “Even if downside pressure persists,” Sun, looking on the bright side, told Decrypt, “the $85,000 level remains a strong area of support."

Ryan Yoon, senior analyst at Tiger Research, told Decrypt he expects Bitcoin to hold $98,000 and maintains his long-term $200,000 price target.

As far as the weakening liquidity sub-plot, analysts have spied some troubling signals in short-term funding markets, or the grease that keeps the world’s trading skids rolling, including the noticeably increased usage of the Fed's Standing Repo Facility accompanied by widening spreads, as well as a U.S. Treasury account that has surpassed $1T, effectively “draining liquidity from the system,” HashKey’s Sun explained.