Bitcoin, the flagship cryptocurrency, experienced a notable downturn on Tuesday, with its price plunging over 8% to dip below the $62,000 mark. This sharp decline marks the most significant single-day percentage drop since November 9, 2022, when the cryptocurrency market faced turmoil following the bankruptcy of FTX exchange, then the third-largest exchange by volume.
The current correction sees Bitcoin retracing approximately 15% from its recent all-time highs of over $73,500, a level reached just last week. The broader cryptocurrency market, as reflected by the CoinDesk 20 Index, has also experienced a correlated pullback of around 16% during the same period.
Several factors have contributed to the recent slide in Bitcoin’s price, as noted by trader and economist Alex Kruger. Chief among these is the notable outflow from U.S.-listed spot exchange-traded funds (ETFs). According to provisional data from investment firm Farside, Tuesday saw a record net outflow of $326 million from spot ETFs, following Grayscale’s ETF witnessing a record outflow of $643 million on Monday.
Kruger identified excessive leverage, particularly in funding, as the primary reason behind the market correction. Additionally, Ethereum (ETH) has played a role in driving the market downward, as the market’s assessment of ETF approval for the cryptocurrency has turned pessimistic. Ethereum, the second-largest cryptocurrency by market capitalization, saw its price surge to around $4,000 post the Dencun upgrade last week, only to retreat to $3,130 subsequently.
Market sentiment has also been influenced by the overheated conditions observed earlier this month, with long traders facing exorbitant annualized funding rates exceeding 100% to maintain their bullish perpetual futures positions. Such a skewed buildup of leverage on the bullish side often precedes significant price corrections, indicating a need for market rebalancing.
Investor attention is now turning to the Federal Reserve’s rate decision scheduled for Wednesday, followed by Chairman Jerome Powell’s press conference. Greg Magadini, Director of Derivatives at Amberdata, emphasized the significance of these events in providing insights into the Fed’s stance on interest rate adjustments amidst robust economic conditions and persistent inflationary pressures.
The recent uptick in the dollar index and U.S. Treasury yields, driven by resilient consumer and producer price indices, has also contributed to a less favorable environment for risk assets, including cryptocurrencies. This broader macroeconomic backdrop has added to the headwinds facing Bitcoin and the wider crypto market, intensifying volatility and prompting investors to exercise caution in the face of uncertainty.
As Bitcoin navigates through this period of correction and market turbulence, stakeholders remain vigilant, closely monitoring developments both within the cryptocurrency space and in the broader economic landscape for signals of future price trends and regulatory dynamics.
| Aspect | Bitcoin (BTC) | Ethereum (ETH) |
|---|---|---|
| Highest Price (recent) | Over $73,500 | Around $4,000 |
| Lowest Price (recent) | Under $62,000 | $3,130 |
| Percentage Decline (BTC) | Over 8% | – |
| Percentage Decline (ETH) | – | Approximately 22.5% |
| Record Outflow (BTC ETFs) | $643 million (Monday) | $326 million (Tuesday) |
| Funding Rates (BTC longs) | Over 100% annualized | – |
| Reason for Correction | ETF outflows, leverage | ETF prospects, market sentiment |
| Key Event | Federal Reserve rate decision | – |