Bitcoin (BTC) Price Swings 'Driven Mostly by Sentiment' as Market Watchers Eye 4 Key Factors

Bitcoin's next big move could hinge on the US presidential election. Former President Donald Trump, viewed as pro-crypto, has laid out plans to fire

Bitcoin’s price movements have been largely dictated by sentiment rather than fundamentals this year, according to GSR analysts. But as the year winds down, what are the key factors that could sway Bitcoin’s price?

Four key factors that could influence Bitcoin’s price movements in the coming weeks.

US elections

Bitcoin’s next big price move could be influenced by the US presidential election. While former President Donald Trump has been vocal in his support for crypto, announcing plans to fire Securities and Exchange Commission Chair Gary Gensler and establish a Bitcoin reserve, Vice President Kamala Harris has been relatively more vague on her stance.

Moreover, there are growing concerns that the November election results could be contested. Speaking to DL News, Adam Guren, chief investment officer at Hunting Hill, noted that a contested election could “land us in some recession, or at least a slowdown.”

“In that version, you’ll have more rate cuts, which will shore up Bitcoin’s price, sending it along with other risk-on assets higher,” Guren added.

As election day nears, poll results and campaign promises are expected to impact sentiment, especially for assets like Bitcoin.

Monetary policy

Central banks could act as a tailwind for Bitcoin if they decide to ease monetary policies, but more aggressive tightening could drag down markets. Historically, increased global liquidity has benefited risk assets like Bitcoin.

According to GSR analysts, the US Federal Reserve and the Bank of Japan are the ones to watch. While the Fed is largely expected to cut rates again in November, especially if it is accompanied by solid economic data, don’t expect the central bank to make an aggressive tax cut like the one in September — the CME Group’s FedWatch tool puts the odds of a 0.25% rate cut at just over 80%.

Meanwhile, Japan has started to shift away from its long-standing negative interest rates, with the Bank of Japan hinting at gradual rate hikes to stabilise the yen. If Japan continues down this path, it could trigger wide swings in crypto prices.

US economy

The US economy remains a major factor in Bitcoin’s near-term outlook, with mixed signals keeping investors on edge. Although recent data shows signs of stability, like steady job growth and positive commentary from the Fed, there are also worrying indicators, such as the recent drop in consumer confidence.

“Incoming data bears watching. U.S. is headed for a soft landing, which should be a positive catalyst for crypto,” GSR analysts noted, adding that any signs of recession fears could send Bitcoin even lower as investors shift toward safer assets.

Silk Road sale

Finally, another factor that could impact Bitcoin is the U.S. government’s potential sale of nearly 69,000 Bitcoin — valued at some $4.2 billion — that were seized from the Silk Road marketplace. After the Supreme Court declined to hear an appeal over the forfeiture, the sale of the Bitcoin could now move forward. However, GSR’s Brian Rudick warns that investors should not ignore the potential impact.

“This could cause a decent downward draft on the markets,” Rudick told DL News. The government’s sale of such a large amount could mirror the market turbulence seen with Mt. Gox disbursements earlier this year, which sent Bitcoin tumbling nearly 20%. If the sale happens, it may lead to increased volatility, depending on the method and timing of the liquidation.

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