Bitcoin’s (BTC) price rapidly decreased on Tuesday, dropping over 8% to less than $62,000. U.S.-listed spot exchange-traded funds (ETFs) also saw a drop in popularity. According to data from TradingView, this represents the most significant one-day percentage fall since November 9, 2022. This stark decrease is the fastest we’ve seen Bitcoin lose value in a single day in quite some time.
That day, prices plunged more than 14% when Sam Bankman Fried’s FTX exchange, previously ranked third largest, became bankrupt. The daily performance mentioned here refers to the percentage change in value from one day to the next, starting at midnight UTC and ending just before midnight the following day.
Advertisement
Recent Bitcoin dip: causes and market impact
Last week, Bitcoin hit all-time highs above $73,500, but since then, prices have fallen by 15%. Similarly, the CoinDesk 20 Index also saw a 16% decrease during the same period. Alex Kruger, a trader and economist, suggests that this recent dip in Bitcoin’s value is due to various reasons, including money being taken out of spot ETFs.
Simplified investment data from Farside reveals that Tuesday saw a record-breaking withdrawal of $326 million from spot ETFs. Additionally, Grayscale’s ETF experienced an unprecedented outflow of $643 million on Monday.
Kruger pointed out a few critical reasons for the Bitcoin crash. Most significant is the issue of too much leverage, which Kruger emphasized as funding matters. Additionally, the declining market for Ethereum played a role, as the market-determined that the ETF would not pass.
Further contributing to the downfall was the negative Bitcoin ETF inflows. However, it’s vital to interpret this data with caution as it is T+1. Lastly, the overwhelming hype for Solana, a notorious “shitcoin,” went too far, according to Kruger’s comments on X.
Ether (ETH), the second biggest digital currency in terms of market worth, recently reached its peak of about $4,000 due to last week’s Dencun upgrade. However, it has dropped to $3,130. This decrease is primarily due to the fading chances that the U.S. SEC will approve an ether spot ETF by May.
Moreover, the crypto market seemed excessively optimistic at the start of the month. Hoping for continual price increases, Bullish traders paid over 100% annually to keep their future bets open. Generally, such a strong focus on optimistic trading can suggest upcoming price drops.
Investors are keenly awaiting the Federal Reserve’s interest rate decision on Wednesday, which a press conference from Chairman Jerome Powell will follow.
As we approach the upcoming week, anticipation builds around the Fed rate decision. This critical event, which Powell’s press conference will follow, promises to shed more light on the Federal Reserve’s stance.
Greg Magadini, the director of derivatives at Amberdata, highlights that the strength of the economy and inflation rates—higher than initially anticipated—are solid reasons for the Fed to retain its hawkish attitude without facing much resistance.
Bitcoin’s false breakout
Analyst Gary Savage has spotted a “false breakout” in Bitcoin, the most valuable cryptocurrency. Savage believes this sudden change points to a split among crypto miners, suggesting that those in the market should proceed with care.
Bitcoin’s value increased dramatically last week, reaching an all-time high of $73,737. This surge was largely due to the launch of Bitcoin exchange-traded funds by significant institutions like BlackRock and Fidelity, showing a growing acceptance of cryptocurrency in the institutional sphere.
Addressing the current situation, the analyst cautioned that this occasion may not present a distinct scenario. He pointed out human nature’s tendency to justify unique circumstances each time, often choosing to ignore the potential consequences, believing that this time would be outliers to previous patterns.
When faced with a Bitcoin optimist, he reaffirmed his pessimistic predictions, saying that people often get trapped when the market peeks.
Julio Moreno, the lead researcher at CryptoQuant, has said that Bitcoin has been riding a wave of over-enthusiasm since its price climbed over $65,000. Despite a significant drop in its value and the rest of the market, a report by U.Today suggests that ‘extreme greed’ is still driving the Bitcoin market.
Advertisement
