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Bitcoin (BTC) today recorded its most significant single-day drop since November 2022, falling over 8% in the last 24 hours to below the $62,000 level. This sharp decline follows the largest cryptocurrency reaching an all-time high of over $73,500 last week, corresponding to a 15% pullback from this peak. Data from the FTX exchange shows that this is the first time since the crash that it has faced the largest daily drop.
ETF Outflows and Market Factors Drive Downturn
The drop in Bitcoin‘s price is linked to various factors, including significant outflows from spot exchange-traded funds (ETFs) listed in the U.S. Temporary data from the investment firm Farside indicates a net outflow of $326 million from spot Bitcoin ETFs on March 19, marking the highest daily net outflow on record. Grayscale’s spot Bitcoin ETF saw a record outflow of $643 million on March 18, contributing to the downward pressure on Bitcoin’s price.
According to trader and economist Alex Kruger, reasons for the market crash include excessive leverage usage, a decline in Ethereum‘s (ETH) price, negative spot Bitcoin ETF inflows, and speculative activity surrounding altcoins such as Solana (SOL). Kruger emphasized the importance of leverage in exacerbating market movements and underlined the impact of ETH’s performance on investor sentiment.
ETH, the second-largest cryptocurrency by market value, has been trending downward since reaching its recent peak of around $4,000 following the successful Dencun update last week. The primary factor fueling this trend is the reduced likelihood of the U.S. Securities and Exchange Commission (SEC) approving a spot Ethereum ETF by May.
Moreover, at the beginning of this month, an overheated crypto market characterized by excessive leverage in bullish positions was signaling a potential correction in prices, raising alarms for investors.
Market Outlook and Fed Interest Rate Decision
Investors’ attention is currently turned to the Federal Reserve’s interest rate decision to be announced today and the statements by Fed Chairman Jerome Powell following the decision. These developments will provide various insights into the Fed’s stance on interest rates and inflation. Greg Magadini, director of derivative products at Amberdata, highlighted that the Fed’s response to a strong economy and higher-than-expected inflation will particularly affect market sentiment for risky assets like cryptocurrencies.
With the U.S. consumer and producer price indices coming in above expectations in February, recent movements in the U.S. dollar index and U.S. Treasury yields have impacted the appeal of risky assets. Higher inflation expectations and a hawkish Fed outlook have dampened investors’ interest in emerging technologies such as cryptocurrencies. Market participants are bracing for hawkish statements from Powell and other Fed officials, anticipating that such remarks could negatively influence cryptocurrency prices.
