US election vs. Fed rate cut — 5 Things to know in Bitcoin this week

Bitcoin (BTC) heads into US Presidential Election week with its own battle for $69,000 and new all-time highs.

• A wide order book and heightening liquidity characterize the start of what will likely be a surprising week for Bitcoin traders.
• Election day is almost here, and so are warnings of a “sell the news” event once the result is in.
• The Federal Reserve interest rate decision will come just two days later, providing another crypto volatility catalyst.
• Bitcoin market cap dominance is at its highest levels in three-and-a-half years after a key monthly close.
• Bitcoin network fundamentals are due to hit new all-time highs all around this week.

BTC price struggles with old resistance

Bitcoin kept bulls frustrated over the weekend as an ongoing comedown from last week’s tap of $73,500 liquidated longs.

Data from Cointelegraph Markets Pro and TradingView confirms a weekend wick below $67,500, with BTC/USD managing only a modest rebound before running out of momentum.

Now, with the US Presidential Election due, volatility is all but guaranteed.

“Currently there’s two clear areas of market liquidity & orderbook depth,” popular trader Skew wrote in part of his latest analysis on X.

“$67K – $65K : bid liquidity & bid depth $73K + : ask liquidity & ask depth.”

Skew predicted that rapid moves between the past week’s low and high could come at short notice.

“In coming days it will be very important how this market trades especially around areas of market liquidity,” he concluded.

“Quite easy to influence price & volatility between $66K & $73K given the wide orderbook.”

Others looked at what could come next, with popular trader and analyst Credible Crypto suggesting that another tap of all-time highs could precede a deeper BTC price correction.

“Lower timeframes looking very constructive here- $BTC looks to be forming a bottom here for that push to ATH,” he told X followers.

Data from monitoring resource CoinGlass shows increasing order book bid liquidity stacking above $67,000 into the new week.

Familiar resistance levels in play since 2021, headlined by $69,000, thus remain in play.

Election sparks Bitcoin “sell the news” warning

The 2024 US Presidential Election is here, and regardless of the result, crypto and risk-asset traders expect fireworks.

Market volatility is expected to reign supreme in the coming days, with moves both up and down on the cards.

As Bitcoin gave hodlers a taste of what might be to come over the weekend, Skew said that the environment was reminiscent of the build-up to key macro events in the past.

“Positioning decay well underway here & temporary hedges scaling into the US election,” he told X followers while analyzing perpetual swaps.

“Underweight positioning & over hedged market is something to look out for in terms of the next predatory move. Market seeks out liquidity into big events.”

In another post, Skew acknowledged that Bitcoin markets looked “more healthy” than last week during the trip to near all-time highs.

“Likely to be a taker dominated market till post US election results,” he continued.

“Slight improvement in market quoting ahead of early week trading, would need to see sustained spot premiums & spot bid to maintain price.”

Trading firm QCP Capital meanwhile had bad news for short-term BTC speculators. In its latest bulletin to Telegram channel subscribers, it predicted a sell-off after the Nov. 5 election.

“While Trump has been favoured as the next POTUS, bets on Trump have come off significantly from a 66% high on Polymarket, to 57% for Trump and 43% for Harris,” it noted about election odds over the weekend. 

“Regardless of the outcome, we believe the Elections will be another sell-the-news action, replicating the Nashville Bitcoin conference.”

FOMC meeting comes at a key moment for DXY

Besides the election, this week hosts another key macroeconomic date in crypto traders’ diaries: the Federal Reserve interest rates decision.

The next meeting of the Federal Open Market Committee (FOMC) on Nov. 7 will show once and for all how the Fed intends to handle conflicting inflationary forces.

As Cointelegraph reported, these have come in the form of overshoots in inflation gauges combined with lukewarm employment. Last week, nonfarm payroll data came in dramatically below expectations, with the prior two months’ numbers also being revised downward.

“The Fed made it clear that maintaining strength in the labor market is taking precedent over fighting inflation,” trading firm Mosaic Asset noted in the latest edition of its regular newsletter, “The Market Mosaic,” on Nov. 3.

Data from CME Group’s FedWatch Tool confirms that markets expect a 0.25% rate cut to result from the FOMC meeting.

With risk assets tipped for volatility throughout the week, Mosaic eyed the VIX volatility index and US Dollar Index (DXY) for cues.

“The reaction to elections could drive a breakout or breakdown in DXY,” it summarized. 

“If the dollar turns back lower at resistance, I believe that’s supportive of risk assets in the near-term.”

DXY stood at 103.82 at the time of writing, fighting to preserve a rebound that began in earnest at the start of October.

Bitcoin dominance hits classic reversal zone

Bitcoin’s share of the total cryptocurrency market cap recently reached a key psychological level — and is holding it.

On Oct. 29, Bitcoin market dominance broke through 60% for the first time since April 2021.

Its performance has not gone unnoticed, as traders tend to equate a strong Bitcoin with flagging altcoins — until the trend changes.

“Bitcoin Dominance is currently around 60.51%, keeping $BTC in the 68k–70k range while altcoins drop 20-40% from recent highs,” analyst Cryptorphic wrote in an X post on the topic on Nov. 4. 

“This pattern is common in bull runs, as rising BTC dominance typically pulls altcoins down. In my experience, a rejection zone between 64% and 65.81% could trigger an altcoin rally while BTC hits new all-time highs and moves sideways.”

Popular commentator MartyParty suggested that Bitcoin dominance was due for a significant downtrend in line with previous halving years. A chart uploaded to X calculated that 224 days after each halving event, dominance began to drop.

Counterarguments during a subsequent debate included the presence of the spot Bitcoin exchange-traded funds (ETFs) propping up BTC demand and the overall lack of interest in crypto among retail investors.

Popular trader and analyst Rekt Capital meanwhile noted that dominance had set a conspicuously bullish monthly close from the perspective of the macro price trend.

“That’s a historic Monthly Close for Bitcoin Dominance,” he summarized on Nov. 1.

“The last time BTC Dominance closed like this in a macro uptrend was back in early 2019. That’s over 5 years ago now.”

Difficulty and hashrate beat records

Bitcoin difficulty is due to headline network fundamentals this week with a trip to new all-time highs.

Related: Bitcoin looks ripe for a rebound, and so do ETH, DOGE, LTC, and XMR

The latest estimates from mining pool CloverPool (formerly BTC.com) see difficulty rising 5.1% at its next automated readjustment on Nov. 5. This will take it above 100 trillion for the first time.

The mining difficulty thus joins the hashrate in exploring new territory as the Bitcoin mining sector emerges from the latest halving.

Meanwhile, a mining-related BTC price metric is busy setting all-time highs of its own. 

As noted by Charles Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments, the Bitcoin Energy Value chart is on track to hit six figures.

“Bitcoin Energy Value, the value of Bitcoin in raw Joules, is knocking on $100K for the first time ever,” he revealed last week.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.