Bankless: Bitcoin Plummets — Where's the Turning Point?
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Bankless: Bitcoin Plummets — Where's the Turning Point?
Bullish market support may emerge, but outflows from Grayscale's Bitcoin Trust accelerate.
Navigating Web3 tides with focused insightsWritten by: Jack Inabinet
Translated by: Kate, Mars Finance
With prices continuing to fall, is there hope for a turnaround?
Bitcoin's decline is erasing weeks of gains. At the same time, the total market capitalization of the crypto market faces its largest drop since the approval of spot BTC ETFs proved to be a sell-the-news event. Will bulls come to the rescue, or is further downside ahead?
Outflows from Grayscale’s Bitcoin Trust (GBTC) are accelerating. Yesterday, they reached $642.5 million, surpassing the previous record of $640.5 million set on January 22, contributing to a total net outflow of $15.44 billion across all spot Bitcoin ETFs.
Following yesterday’s performance, GBTC has now experienced the largest outflow in ETF history since stock markets hit their lows after the global financial crisis in March 2009. Grayscale now hopes to reverse this poor track record by committing to gradually reduce its high fees.
The selling pressure resulting from these fund flows was reflected in yesterday’s cryptocurrency prices, with Bitcoin experiencing a nearly 9% peak-to-trough drop following the opening of U.S. equities on Monday.
As prices fell, liquidations followed.
Over the past 24 hours, a total of $635 million in leveraged positions were forcibly liquidated, with 80% coming from longs, bringing funding rates back to normal levels and creating a supportive environment for traders looking to establish new long positions.
Despite the drop in Bitcoin’s price, Japan’s $1.4 trillion national pension fund—the world’s largest pension fund—announced it is seeking information on Bitcoin to diversify its investment portfolio, renewing hopes for institutional adoption of cryptocurrencies.
Markets are showing strong risk-on sentiment, suggesting we are still in a bull market. However, it should be noted that a standard 30% bull market correction would bring BTC down to $51,000, leaving room for further downside.
Tomorrow’s Federal Reserve interest rate decision could become a major catalyst for market volatility, as recent hot inflation data may prompt the Federal Open Market Committee (FOMC) to adopt a tougher policy stance than seen over the past few months. Such a shift would delay market expectations for rate cuts and dampen the uninterrupted risk-on rally that has persisted since October last year.
The probability of a rate cut this month has plummeted to just 1%, a sharp decline from the 90% chance expected at the end of last year for a March rate cut.
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