Bitcoin: interest rates, shutdown, liquidations — 'triple headwinds'... Will 100,000 dollars be breached?

US Fed hawkish signals lower expectations for rate cuts↓

Prolonged shutdown spreads liquidity squeeze·risk-off

"100,000-dollar test… possibility of a year-end rebound"

Bitcoin (BTC) is seeing intensified declines. A combination of reduced expectations for rate cuts following hawkish remarks from the US Federal Reserve (Fed), a prolonged US federal government shutdown, and large-scale liquidations of long (buy) positions has sharply weakened investor sentiment.

On the 3rd (local time), based on the Binance Tether (USDT) market, Bitcoin fell 2.5% from the previous day to as low as 104,200 dollars. The 105,000-dollar level was breached for the first time in 18 days since the 17th of last month. Bitcoin is currently trading around 104,610 dollars.

Rate cut expectations dashed and shutdown prolonged…'liquidity fear' spreads

The immediate cause of the decline is attributed to a series of hawkish remarks from Fed officials. Because investors had increased exposure to risk assets based on hopes for rate cuts, the change in the Fed's signals triggered a rapid market-wide adjustment.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago and considered a close ally of Fed Chair Jerome Powell, said, "The bar to implement a rate cut at the December meeting is much higher than before. Inflation remains above target, so premature easing should be avoided," adding, "While rates could be lower in the long term, it is necessary to maintain a tightening stance for the time being."

Fed Governor Lisa Cook also said the same day, "Nothing has been decided yet," and noted, "Key data releases have been delayed due to the shutdown, making it difficult to hasten monetary policy decisions." Earlier, Chair Powell had also underlined that "an additional rate cut in December is not a foregone conclusion." As the Fed's internal cautious stance strengthened, expectations for rate cuts within the year cooled rapidly and selling spread across risk assets.

Economic uncertainty stemming from the prolonged US federal government shutdown has further prompted investors to avoid risk assets. With budget negotiations between Democrats and Republicans repeatedly failing, the federal government has been paralyzed for 35 days. If the situation extends past the 5th, it is expected to become the longest shutdown in US history. The Senate is scheduled to hold its 14th vote today (November 4).

The Congressional Budget Office (CBO) warned, "If the shutdown lasts four weeks, GDP growth could fall by 1% percentage point, and if it continues for six weeks, it could fall by 2% percentage points," adding, "Economic losses could reach up to 14 billion dollars."

On-chain data also reflect this macroeconomic uncertainty. Investors are withdrawing funds from the crypto market. Blockchain analytics platform CryptoQuant said, "The US fiscal paralysis is not merely budget uncertainty but is leading to a 'freeze in market liquidity,'" adding, "This phenomenon has already begun to show up in Bitcoin network indicators."

In fact, Bitcoin exchange holdings increased for the first time in six weeks. This indicates investors are moving coins back to exchanges, generally interpreted as a signal that precedes profit-taking or risk reduction. Conversely, miners' Bitcoin holdings have fallen to their lowest level since mid-last year. Analysts attribute this to the suspension of energy subsidies and tax breaks due to the shutdown, leading miners to sell holdings to cover operating costs.

"100,000-dollar level at risk" vs "will rebound by year-end"

Liquidation pressure in the market also intensified the decline. According to CoinGlass data, positions worth 128,000,000 dollars were liquidated across the network on the 3rd, of which 123,000,000 dollars were long (buy) positions. The unwinding of overheated long positions increased short-term downward pressure.

Technical indicators also showed continued bearish signals. Katie Stockton, founder of Fairlead Strategies, warned, "Bitcoin has fallen below the 200-day moving average (109,800 dollars). This is a key indicator for gauging the long-term trend and a major support level," adding, "A technical correction could continue for several weeks. Bitcoin's next support level is 94,200 dollars."

However, a recovery is seen as possible in the medium to long term. CoinShares said, "With the prolonged shutdown and worsening on-chain liquidity acting together, a short-term correction in Bitcoin is unavoidable," and added, "If institutional inflows resume, the medium- to long-term trend could return to recovery." Stockton also said, "There remains upside potential to 134,500 dollars in the long term."

Rachel Lin, CEO of SynFutures, said, "Cautious optimism should be maintained in November," adding, "Bitcoin may trade sideways in early November, but if a psychological turning point occurs, a rebound could be triggered." She continued, "The current decline appears to be a correction. Long-term investors are still buying, and ETF inflows remain steady," forecasting, "Bitcoin could rise as high as 150,000 dollars by the end of the year."