On Tuesday, March 19th, Bitcoin slumped to its lowest price in weeks as analysts warned that the world’s largest cryptocurrency by market cap could ‘crack’ its support level.
Bitcoin is now down over 15% from its all-time high of nearly $73,800, bottoming at $60,760 according to data from TradingView. The apex cryptocurrency continued to face selling pressure due to several key headwinds.
Spot Bitcoin ETF Outflows Trump Inflows, Nearly $500 Million Exited the Funds in 2 Days
Bitcoin’s recent rise to the top was largely driven by the record-setting trading volume of spot Bitcoin exchange-traded funds (ETFs) issued by some of the largest institutional investors in the world. The mass flood of institutional money into the crypto market has resulted in the stock market-traded funds registering their 10 largest trading volumes and inflow rates over the last three weeks.
However, this week saw two consecutive days of net outflows from the spot ETFs, as per data from UK-based investment firm Farside.
Almost $500 million had flown out of the ETFs in the last two days. On Monday, the Grayscale Bitcoin Trust ETF witnessed the largest outflow in a single day of $642 million. The day ended with net outflows of $154 million.
Usually, outflows from GBTC are investors exiting their positions in the fund and moving them to Bitcoin ETFs that charge lower fees, like BlackRock’s IBIT and Fidelity’s FBTC, which are two of the most popular BTC-focused exchange-traded products.
However, this week was marked by lower inflows to other spot Bitcoin ETF offerings, making for lackluster statistics and negatively affecting Bitcoin’s liquidity.
Trading firm QCP Capital had warned its Telegram channel subscribers that the second net outflow day could have serious implications for Bitcoin’s price strength.
There has also been a noticeable uptick in liquidations for Bitcoin futures contracts. According to a report by Coinglass, this could send Bitcoin further down the price graph as crypto exchanges force users to exit their leveraged positions in the crypto asset.
Sharing his thoughts on why Bitcoin is down, financial commentator Tedtalkmacro explained that traders are taking a “wait and see stance” before the upcoming Federal Open Market Committee (FOMC) meeting and the tax season in the US.
“Regular programming will resume, but some chop first,” he added.
Federal Reserve to Leave Interest Rates as it is, Rate Cuts Expected in May and June
The latest estimates from CME Group’s FedWatch tool indicate that there is only a 1% chance of a “pivot” – or return to rate cuts – for March, but a 9.1% chance for rate cuts at the FOMC’s next gathering in May.
However, the odds are at 55% for the US Federal Reserve to slash the borrowing interest rate on the dollar at June’s meeting.
Short-Term BTC Holders Taking Profits Increased Selling Pressure
On-chain analysis firm CryptoQuant said that short-term holders of Bitcoin – users who held the token for less than five months – took profits in the past week when the cryptocurrency was trading above its previous all-time high, which may have contributed to the selling pressure.
Bitcoin lost nearly $150 billion worth of market cap in just three hours, while the crypto market in total lost over $320 billion in market value in less than 24 hours.
At the time of writing, Bitcoin (BTC) is trading at $63,100 – down nearly 1% from the previous day’s price.
The leading cryptocurrency has experienced a remarkable 40% growth in value since the turn of the year, resulting in it breaking its all-time highs twice in three days last month.
