Bitcoin (BTC)'s price correction accelerated on Tuesday as U.S.-listed spot exchange-traded funds (ETFs) lose popularity.
The leading cryptocurrency by market value fell more than 8% to below $62,000, according to data from charting platform TradingView. This is the largest daily percentage (UTC) decline since November 9, 2022. Prices plummeted more than 14% that day as Sam Bankman Fried's once No. 3 FTX exchange went bankrupt. The daily performance referred to herein represents the percentage of profit or loss for the day, starting at midnight UTC and ending at 23:59:59 UTC.
Prices have fallen 15% from last week's all-time high of more than $73,500. The CoinDesk 20 Index fell 16% over the same period.
According to trader and economist Alex Kruger, Bitcoin's recent price decline is being driven by several factors, including outflows from spot ETFs.
Spot ETFs saw net outflows of $326 million on Tuesday, the largest on record, according to preliminary data released by investment firm Pharcyde. On Monday, the Grayscale ETF posted record outflows of $643 million.
“The reasons for the crash, in order of importance, are: 1. Leverage is too high (funds are important). #2 ETH is driving the market (market decides that the ETF will not pass). #3. Negative BTC ETF inflows (data (Please note that is T+1). #4 Solana's shitty coin mania (too much).” Krueger said this in X..
Ether (ETH), the second-largest cryptocurrency by market capitalization, peaked at around $4,000 following the Dencun upgrade last week, but has since fallen to $3,130. One reason for the decline is that it is less likely that the US SEC will greenlight the EtherSpot ETF by May.
Additionally, the crypto market appeared to be overheating earlier this month, with long traders paying out over 100% annualized returns to maintain bullish perpetual futures bets. This unilateral build-up of bullish leverage often signals a price correction.
Investors will now be closely monitoring the Federal Reserve's interest rate decision on Wednesday following Chairman Jerome Powell's press conference.
“This week will see the Fed's interest rate decisions, followed by Chairman Powell's press conference, which will provide more insight into whether the Fed is still looking at lowering rates later this year.'' Amber Data Greg Magaddini, director of derivatives, said the strong economy and higher-than-expected inflation are reasons the Fed remains hawkish without a major rebound.
The dollar index and U.S. Treasury yields have recently risen on the back of weak consumer and producer prices, making risky assets, including emerging technologies like cryptocurrencies, less attractive.
