The cryptocurrency market is on a decline today, with the total market value falling by 7.68% to $2.27 trillion on March 19th. The market’s leading cryptocurrency by value, Bitcoin, led the losses with a drop of about 7% to around $62,650 during the day. The second-largest crypto by market value, Ethereum, also fell by about 8% to $3,200 in the same period.
ETF Funds and the Crypto Market
The downturn in the cryptocurrency market value today coincided with the largest single-day outflow ever recorded from Bitcoin exchange-traded funds (ETFs). The Grayscale Bitcoin ETF fund experienced an outflow of $642.5 million on March 18th, marking the fund’s largest outflow to date.
Meanwhile, according to data from Farside Investors, Fidelity’s Bitcoin ETF fund saw its lowest entry day on record with $5.9 million, leading to a net outflow of $154.3 million from spot Bitcoin ETF funds.
Bitcoin ETF funds are seeing a slowdown in capital inflows ahead of the Federal Open Market Committee meeting on March 20th. The potential for a 2024 bull run in Bitcoin and consequently the crypto market depends on inflation falling below 3% or signs of economic downturn, prompting the Fed to shift from tight to loose monetary policy.
The Process Awaiting the Markets
The decline in the crypto market on March 19th is part of a broader correction movement that started on March 14th, creating a local peak with approximately $2.72 trillion. The correction was initially signaled by divergence signals before the drop, observed with a decreasing daily Relative Strength Index (RSI) against an increasing market value. The downward trend indicates a loss of fundamental strength in the price increase.
Secondly, the market’s daily RSI value reached excessively high levels before the correction, indicating overvaluation and leading to decreased investor demand due to perceived excessive prices. Meanwhile, the sharp rise in Bitcoin’s price, along with the Net Unrealized Profit and Loss (NUPL), signaled a significant opportunity to realize profits.
Historical data indicates that NUPL values above 0.6 rarely persisted without leading to significant price adjustments. Therefore, a noticeable correction could be seen in March, and a broader downward movement may have already begun.
