Bitcoin Not Yet Bottomed Out? Hacking and US Midterm Elections Overlap, Raising Concerns of Further Plunge

▲ Bitcoin (BTC) Crash / ChatGPT Generated Image ©

As Bitcoin (BTC) tests its key support level of $76,445 after a sharp drop due to the $6.3 billion Binance hacking shock, the US midterm elections and on-chain indicators are warning of further downside potential.

According to investment media FXStreet on November 3 (local time), Bitcoin fell by approximately 5% overnight following the $6.3 billion hacking incident at Binance on October 29, pushing it down to the 200-day exponential moving average (EMA) of $76,445. It had previously broken below the 50-week exponential moving average of $78,457.99. As both moving averages have historically acted as key trend reversal points for Bitcoin, whether the current price level holds as support has been identified as a critical variable determining future direction.

In technical analysis, bullish and bearish scenarios diverge depending on whether the 200-day moving average is defended. If Bitcoin rebounds from this support level, it could maintain its existing uptrend, but if it breaks below it, the likelihood of a shift to a bearish phase increases. However, it has so far maintained the long-term upward logarithmic channel and the support area near the 200-week exponential moving average, which have been in place for several years. This area is defined by a Bollinger Bands standard deviation of 0.25, and after Bitcoin first broke above it in 2019 and then reapproached it, it acted as a support line 4 out of 5 times.

However, analysis suggests that it is difficult to conclude that Bitcoin has bottomed out simply because long-term support is maintained. In particular, the US midterm elections on November 3 are cited as a major uncertainty. Historically, unlike the S&P 500 index, Bitcoin has tended to decline in the first six months after midterm elections. Given that stock market and Bitcoin price movements have diverged after political events, it is difficult to expect a rebound in the cryptocurrency market based solely on election results.

On-chain indicators also do not yet show clear bottom signals. The Net Unrealized Profit/Loss (NUPL) indicator from Bitcoin analysis platform BITBO has not shown a capitulation signal, where the majority of investors are in a loss state. Such capitulation phases have been observed at major market bottoms in the past. Analyst Zorrays Junaid assessed that, when combining past price movements after midterm elections with the NUPL indicator, the possibility of Bitcoin even breaking below its weekly logarithmic uptrend channel cannot be ruled out.

Accordingly, there is a forecast that price volatility for Bitcoin and MicroStrategy (MSTR) could expand over the next six months. While Junaid acknowledged the statistical limitations due to the small number of past midterm election cases, he currently places more weight on the possibility of further declines rather than an uptrend. The analysis concludes that while Bitcoin maintains its long-term upward structure, the defense of the 200-day moving average and the absence of on-chain capitulation signals remain key risk factors for the short-term market.

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