Bitcoin’s Price Decline Explained
Bitcoin’s price took a big dip on Tuesday as the popularity of U.S.-listed spot exchange-traded funds (ETFs) declined. The main cryptocurrency, Bitcoin, dropped over 8% to below $62,000. This is the biggest one-day drop since November 9, 2022, when prices fell over 14% due to the bankruptcy of Sam Bankman Fried’s FTX exchange.
Prices have fallen by 15% from last week’s record highs of over $73,500. The CoinDesk 20 Index also dropped 16% during the same time.
Reasons Behind Bitcoin’s Drop
Several factors contributed to Bitcoin’s recent slide, including money leaving spot ETFs, according to trader and economist Alex Kruger. Data from investment firm Farside shows 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.
Kruger highlighted reasons for the crash, including too much leverage, Ethereum affecting the market negatively, and negative Bitcoin ETF inflows. Additionally, the hype around Solana’s Shitcoin, which went too far, also played a role.
Ether’s Decline and SEC’s Decision
Ether, the second-largest cryptocurrency, hit around $4,000 after last week’s Dencun upgrade but has since dropped to $3,130. One reason for the slide is the decreasing chance of the U.S. SEC approving an ether spot ETF by May.
Signs of Overheating in the Crypto Market
The crypto market appeared overheated earlier this month, with long traders paying high fees to keep their bullish futures bets open. Such one-sided leverage often leads to price corrections.
Impact of Economic Factors
Investors are now watching closely for Wednesday’s Federal Reserve rate decision and Chairman Jerome Powell’s press conference. Recent increases in the dollar index and U.S. Treasury yields have made risk assets like cryptocurrencies less attractive.
