Bitcoin’s Price Correction Accelerates as U.S.-Listed ETFs Lose Favor
Bitcoin’s (BTC) price correction intensified on Tuesday as the U.S.-listed spot exchange-traded funds (ETFs) fell out of favor, causing the leading cryptocurrency to plummet over 8% to under $62,000. This marks the biggest single-day percentage decline since November 9, 2022, when prices tanked over 14% due to the bankruptcy of Sam Bankman Fried’s FTX exchange.
Since reaching record highs of over $73,500 last week, Bitcoin has pulled back 15%, with the CoinDesk 20 Index also dropping 16% over the same time frame. The recent price slide has been attributed to various factors, including significant outflows from the spot ETFs.
According to trader and economist Alex Kruger, provisional data from investment firm Farside shows a net outflow of $326 million from the spot ETFs on Tuesday, the largest on record. Additionally, Grayscale’s ETF witnessed a record outflow of $643 million on Monday.
Kruger highlighted the reasons for the crash, listing excessive leverage, Ethereum’s impact on the market, negative BTC ETF inflows, and the recent frenzy surrounding Solana as contributing factors. Meanwhile, Ethereum (ETH) has also seen a decline, dropping from around $4,000 to $3,130 following last week’s Dencun upgrade.
The crypto market appeared overheated earlier this month, with long traders paying high annualized funding to maintain their bullish perpetual futures bets. This buildup of leverage on the bullish side often precedes price corrections.
Investors are now eagerly awaiting Wednesday’s Federal Reserve rate decision, which will be followed by Chairman Jerome Powell’s press conference. The recent increase in the dollar index and U.S. Treasury yields, driven by inflation concerns, has dampened the appeal of risk assets like cryptocurrencies.
Greg Magadini, director of derivatives at Amberdata, emphasized the importance of the Fed’s decision, stating that the strong economy and higher-than-anticipated inflation could influence the central bank to maintain a hawkish stance. As the market continues to react to these developments, the future of Bitcoin and other cryptocurrencies remains uncertain.