- Significant ETF outflows and excessive market leverage contributed to an almost 8% decline in the price of Bitcoin.
- Future Federal Reserve actions may have an effect on the state of the market and the direction of Bitcoin.
Recently, Bitcoin (BTC) dropped roughly 8% to below $62,000. The highest loss since November 9, 2022, when Sam Bankman-Fried’s FTX exchange failed, was over 14%.
This decline, which has seen Bitcoin fall 15% from its most recent peak of around $73,500, is indicating a broader market trend. A 16% decline in the CoinDesk 20 Index echoed the loss in Bitcoin.
The Sharp Decline in Bitcoin: ETF Outflows and Market LeverageÂ
Renowned Argentine economist and crypto trader Alex Krüger offered his observations on Twitter, identifying four primary causes of the market’s volatility.
Reasons for the crash, in order of importance
(for those who need them)
#1 Too much leverage (funding matters)
#2 ETH driving market south (market decided ETF not passing)
#3 Negative BTC ETF inflows (careful, data is T+1)
#4 Solana shitcoin mania (it went too far)— Alex Krüger (@krugermacro) March 20, 2024
Krüger said that high market leverage was the main reason behind the decline. He also emphasized the substantial role Ethereum (ETH) had in intensifying the bear market trend, in addition to negative inflows into Bitcoin ETFs and an increase in what he terms a “Solana shitcoin mania,” which he believes has reached unmanageable proportions.
The performance of U.S.-listed spot exchange-traded funds (ETFs), which have recently witnessed a drop in investor interest, has also drawn attention.
According to statistics from the investment firm Farside, these ETFs saw a record net outflow of $326 million on Tuesday, just a day after Grayscale’s ETF saw a historic outflow of $643 million on Monday.
It means that investors’ opinions of Bitcoin and possibly the entire cryptocurrency sector are growing increasingly negative. For a deeper dive into these developments, a detailed explanation is available in this YouTube video.
The Coming Federal Reserve Decision
Given the current state of market uncertainty, ETHNews previously reported that the Federal Reserve’s rate announcement on Wednesday is highly anticipated.
Chairman Jerome Powell’s decision and the press conference that followed are anticipated to provide insight into the Fed’s outlook on the economy, inflation, and monetary policy.
Director of derivatives at Amberdata, Greg Magadini, emphasized the importance of the Fed’s upcoming statements, stating,
“We will have Powell’s press conference and the Fed rate decision this coming week. This will help us determine whether rate reductions by the Fed are still anticipated for this year. The Fed is continuing to be hawkish with little resistance because to the robust economy and higher-than-expected inflation.”