New York City, NY – Bitcoin’s prices experienced a significant decline on Tuesday as U.S.-listed spot exchange-traded funds (ETFs) lost appeal among investors. The leading cryptocurrency plummeted over 8% to trade below $62,000, marking its largest single-day percentage drop since November 9, 2022. This recent pullback comes after prices hit record highs of over $73,500 last week, with the CoinDesk 20 Index also retracting by 16% during the same period.
Numerous factors have contributed to Bitcoin’s latest price slide, with outflows from the spot ETFs being a significant catalyst. Data from investment firm Farside showed a net outflow of $326 million from spot ETFs on Tuesday, the largest on record. Grayscale’s ETF also experienced a record outflow of $643 million the day prior, indicating a shift in investor sentiment towards these instruments.
Trader and economist Alex Kruger pointed out several reasons behind the recent market correction, citing excessive leverage, negative BTC ETF inflows, and the impact of other cryptocurrencies like Ethereum and Solana on Bitcoin’s performance. Ether, the second-largest cryptocurrency, reached a peak of around $4,000 following the Dencun upgrade but has since declined to $3,130. The dwindling probability of the U.S. SEC approving an ether spot ETF by May has added to the downward pressure on prices.
The overheated crypto market earlier this month saw long traders paying annualized funding rates of over 100% to maintain their bullish bets, signaling a potential correction in prices. Investors are now monitoring the Federal Reserve’s rate decision and Chairman Jerome Powell’s press conference on Wednesday for further insights into the central bank’s policy outlook.
Greg Magadini, director of derivatives at Amberdata, emphasized the importance of the Fed’s upcoming decision, noting that the strong economy and persistent inflation could influence the central bank’s hawkish stance. The recent uptick in the dollar index and U.S. Treasury yields, driven by inflation concerns, has dampened the appeal of risk assets like cryptocurrencies in the market.
Overall, the crypto market’s recent volatility underscores the challenges and uncertainties facing digital assets as they navigate evolving regulatory environments and macroeconomic trends, shaping investor sentiment and market dynamics moving forward.