Bitcoin's price slid on Thursday, erasing gains made earlier in the week, after oil prices jumped. The largest cryptocurrency was down nearly 4% over a 24-hour period in New York, trading as low as $81,331 at one point.
Oil Spike and Inflation Fears
On Wednesday, bitcoin was fast approaching $85,000 as investors piled back into tech stocks following Elon Musk's SpaceX earnings. But conflict in the Middle East pushed oil prices higher, spurring inflation fears in the U.S. A surging oil price can—at least in the short term—hurt bitcoin and other risk-on assets because it increases the chances of the U.S. central bank raising interest rates.
Bitcoin has historically performed well with low interest rates due to increased liquidity, moving at times with tech stocks and the Nasdaq.
Geopolitical Tensions Weigh on Markets
Stocks slid on Thursday following news of more attacks from the Yemeni Houthis on Saudi Arabia, stoking fears of oil supply disruptions and a wider Middle East conflict. Bitcoin has typically faced downward pressure on news of war and rallied on hopes of a ceasefire. When the U.S. and Israel first attacked Iran in February, the coin nosedived, and had been shaky on news of war in March and April.
Affordability Crisis and Fed Policy
Rising oil is stoking what many politicians are calling an affordability crisis in the U.S. Americans will go to the polls on November 3, and surging inflation is one of the hottest topics. The Federal Reserve has said getting inflation down in the world's largest economy is its top priority.
Bitcoin's Recent Strength
Despite the price dip, bitcoin just had its best quarter in years, and analysts have said the coin is now in a bull market after rising above its 365-day moving average. Last month, bitcoin shrugged off the Federal Reserve raising interest rates and lawmakers blocking landmark crypto legislation, the Clarity Act.
