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- Bitcoin plunged by 8% on Tuesday, a historic single-day fall for the first time since the FTX exchange collapsed.
- According to an analyst, the market is reacting to the negative inflow of Bitcoin ETF, as well as the fading hope of an Ethereum (ETH) ETF approval in May.
Bitcoin (BTC) grabs headlines once again following a historic single-day plunge in a pre-halving phase marked by a “severe bloodbath”. With the current rattling of volatility in the crypto market, investors brace for any potential extension of the current market trend while hoping for a turnaround in the post-halving era. On Tuesday, Bitcoin declined by 8%, falling below $62k.
According to reports, this downward trend is reminiscent of the aftermath of the FTX Exchange crash in 2022. It can be recalled that the price tanked by 14% on Nov. 9, 2022, following reports that the then-third largest crypto exchange had gone bankrupt. Interestingly, this unexpected decline brings to mind a recent forecast by Matrixport Research which suggested the asset could fall to $36k.
The sudden decline of the price by 15% from the all-time high of $73,500 was investigated, of which considerable outflows from spot Exchange Traded Funds (ETF) stood tall. According to investment firm Farside, there was a historic net outflow of $326 million on Tuesday. Interestingly, Grayscale’s ETF had also recorded a net outflow of $643 million on Monday.
Analyst Assesses the Possible Reasons for the Bitcoin Market Pullback
Assessing these catalysts, trader, and economist Alex Kruger pointed out that too much leverage, doubts in Ethereum (ETH) ETF approval, and negative Bitcoin ETF inflows might have driven the market south.
Reasons for the crash, in order of importance: #1 Too much leverage (funding matters). #2 ETH driving market south (market decided ETF was not passing). #3 Negative BTC ETF inflows (careful, data is T+1). #4 Solana shitcoin mania (it went too far).
As of the time of writing, Bitcoin was trading at $61,918, falling by 4% in the last 24 hours and 14% in the last seven days. Surprisingly, its 24-hour trading volume was up by 27%.
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Ethereum (ETH), which was once peaking at around $4,000 has not been spared as it declined by 6% in the last 24 hours and 22% in the last seven days to trade at $3,183.
Market analysts justify that this market pullback was long overdue as long traders paid annualized funding of over 100% to “keep their perpetual futures bets open.” This, according to market experts, usually presages price correction. The next market move could be largely affected by the expected Federal Reserve decision today by Chairman Jerome Powell. As confirmed by Greg Magadini, director of derivatives at Amberdata, the press conference could provide enough information on the possibility of a rate cut this year.
This upcoming week, we will have the Fed rate decision followed by Powell’s press conference. This will give us more insight into whether the Fed is still seeing rate cuts on the horizon this year. The strong economy and higher-than-anticipated inflation continue to be reasons for the Fed to remain hawkish without much push-back.
