Bitcoin (BTC) price correction accelerated on Tuesday as US-listed spot exchange-traded funds (ETFs) fell out of favor.
The leading cryptocurrency by market value fell over 8% to below $62,000, data from charting platform TradingView shows. This is the largest single-day percentage drop (UTC) since November 9, 2022. On that day, prices plunged over 14% as Sam Bankman Fried's FTX exchange, formerly the third largest, went bankrupt. The daily performance mentioned here represents the percentage gain or loss in a day starting at midnight UTC and ending at 23:59:59 UTC.
Prices are down 15% from the record high of over $73,500 reached last week. The CoinDesk 20 Index is down 16% over the same period.
According to trader and economist Alex Kruger, Bitcoin's recent price drop was triggered by several factors, including outflows from the spot ETFs.
Preliminary data from investment firm Farside shows there was a net outflow of $326 million from spot ETFs on Tuesday, the largest on record. On Monday, Grayscale's ETF saw a record outflow of $643 million.
“Reasons for the crash, in order of importance: #1 Too much leverage (financing is important). #2 ETH is driving the market lower (the market decided the ETF would not pass). #3 Negative BTC ETF inflows (Caution, data is T+1). #4 Solana shitcoin mania (it went too far),” Kruger said on X.
Ether (ETH), the second-largest cryptocurrency by market value, peaked at around $4,000 after the Dencun upgrade last week and has since fallen to $3,130. One reason for the decline was the dwindling likelihood that the US Securities and Exchange Commission will green light an Ether spot ETF by May.
Additionally, the crypto market appeared to be overheated earlier this month as long traders paid over 100% annual funding to keep their bullish perpetual futures bets open. Such a one-sided build-up of leverage on the bullish side is often a harbinger of price corrections.
Investors will now closely watch the Federal Reserve's interest rate decision on Wednesday, which will be followed by Chairman Jerome Powell's press conference.
“Next week we will have the Fed's interest rate decision, followed by Powell's press conference. This will give us more insight into whether the Fed still has interest rate cuts on the horizon this year. “The strong economy and higher-than-expected inflation continue to be reasons for the Fed to remain hawkish without much action,” said Greg Magadini, director of derivatives at Amberdata.
Both the dollar index and U.S. Treasury yields have risen recently amid stalled consumer price and producer price indices, which has reduced the attractiveness of risk assets, including new technologies such as cryptocurrencies.
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