The price of Bitcoin (BTC) has experienced a significant decline over the past 24 hours, falling below the critical threshold of $70,000. After hitting a high of $73,620 on Tuesday, the cryptocurrency fell about 5.7% to reach a low of $68,830 on Friday. Analysts point to several key factors behind this decline:

No. 1 Risk-averse mood before the US elections

The timing of Bitcoin’s price drop coincides with former President Donald Trump’s narrowing lead over Democratic vice presidential candidate Kamala Harris in forecasting markets such as Polimarket and Kalshi, where users place bets on election results. Bitcoin has been considered a “Trump hedge” due to the former president’s powerful support for the cryptocurrency sector.

Donald Trump has proposed creating a “strategic Bitcoin reserve” in the United States if re-elected. Speaking at the Bitcoin 2024 conference, he outlined plans to hold all Bitcoin currently held or acquired by the US government in this reserve. The initiative is a centerpiece of his campaign to strengthen the United States as a leader, aiming to make the country the “crypto capital of the planet.”

At the beginning of the week, when Trump’s lead over Harris was more significant, Bitcoin approached its record high of $73,777. The narrowing of Trump’s lead appears to have prompted investors to adopt a risk-averse stance, which contributed to the decline in prices.

HornHairs cryptocurrency analyst excellent that mocking before the elections sets a precedent. “Mocking elections 5-6 days before the elections took place in both 2020 and 2016. Price then said he would never again test the minimums set the week before the election. Be careful what you sell here,” he noted via X.

#2 The S&P 500 is losing its 3-month trend line

The correlation between Bitcoin and conventional financial markets may have also influenced BTC’s price movement. The S&P 500 fell to its lowest level since October 9, potentially impacting investor sentiment in the cryptocurrency space.

Analysts at The Kobeissi Letter noted that even though major technology companies such as Apple are reporting good profits, their stock prices have fallen. “Another tech giant that exceeded profits but recorded lower sales,” they say excellentadding that tech stocks faced widespread selling even as Meta, Amazon and Apple beat earnings expectations. They added: “Markets appear to be de-risking ahead of next week’s election.” Prepare for volatility.”

Cryptocurrency trader Marco Johanning highlighted fears that the S&P 500 will lose its three-month trend line. “Given that the S&P 500 lost its 3-month trend line yesterday, this looks more like a potential sell-off ahead of Tuesday’s US elections and lower prices in the short term. The ideal rebound level is the 7-month trend line (blue). I don’t want prices to be below the POC/key level around 63k. (red),” he wrote via X.

#3 Rinse the lever

The significant expansion of leveraged positions in the markets also contributed to the decline in Bitcoin’s price. A market correction appears to be a hearty response to excessive expansion due to leverage.

Renowned cryptocurrency analyst Miles Deutscher noted: “This pullback is normal (and expected). The market has looked overstretched over the past few days, largely driven by leverage. I’m still not buying much because it’s not a full cascade yet – I’ll wait for one of those days around the election. Not a bad DCA day for some coins.”

Austin Reid, global chief revenue and business officer at cryptocurrency trading firm FalconX, noted that the cryptocurrency derivatives market was “on fire” ahead of the election, with open BTC, ETH and SOL futures crossing the $50 billion mark for the first time .

Network analyst Axel Adler Jr reported that open interest was at reduced by $2.1 billion, representing significant leverage washout.

According to data Coinglass liquidated 93,864 traders in the last 24 hours, with a total liquidation amount of $286.73 million. The largest single liquidation order was for Binance’s $11.26 million BTCUSDT pair. In the case of Bitcoin alone, $81.38 million in long positions were liquidated – the most since October 1.

At the time of publication, the price of BTC was $69,446.

Featured image created with DALL.E, chart from TradingView.com