The cryptocurrency market faced a significant upheaval as investors withdrew a staggering $680 million from Bitcoin ETFs, marking the largest outflow in a single day since their approval in January. This move coincides with a broader recalibration of market expectations concerning interest rate cuts by the Federal Reserve (Fed) projected for 2025.
Grayscale and Bitwise Bitcoin ETFs See Decline
In light of these events, Bitcoin ETFs experienced a substantial price drop, declining by an additional 5% to trade around $97,400 by the week’s end. This sell-off is part of a broader downturn in risk assets, influenced by the Fed’s revised economic projections revealed earlier in the week. The central bank now predicts only two quarter-point rate cuts for the coming year, a significant decrease from the four cuts anticipated during its September meeting.
Impact on Notable Bitcoin ETFs
Key Bitcoin ETFs, such as Grayscale’s Bitcoin Trust and Bitwise’s Bitcoin ETF, have experienced approximately 8% declines following the Fed’s new guidance. Bitcoin itself witnessed a 9% loss within the same period. Thursday’s outflows notably ended a 15-day streak of inflows for the twelve US Bitcoin ETFs, which had collectively garnered around $5.3 billion during this time.
Market Movements and Investor Behavior
Earlier this week, Bitcoin reached a record high of just over $108,000, only to dip below the $100,000 threshold on Thursday. Before its recent recovery, hovering around $100,000, Bitcoin had fallen to $92,000. The bearish market sentiment is partly attributed to the Fed’s cautious approach, coupled with seasonal profit-taking by institutional investors in Bitcoin ETFs.
Analysts Warn of Continued Crypto Sell-Off
Market analysts are cautioning about a potential continued sell-off in the cryptocurrency space. Joseph Dahrieh, managing principal at Tickmill, highlighted the possible impact on market sentiment, emphasizing that Bitcoin dropping below the USD 100,000 mark could indicate short-term volatility and downside risks.
Volatility and Liquidations
The recent volatility has been intensified by extensive liquidations in both long and short positions, amounting to over $240 million within a 24-hour span. Antonio Di Giacomo, a senior market analyst at XS.com, noted that the Fed’s cautious stance on fewer cuts for 2025 has fostered an environment of uncertainty and speculation.
Future Market Outlook
Looking forward, the cryptocurrency market may continue to face downward pressure in the near term. Alex Kuptsikevich, chief market analyst at FxPro, speculated that the total cryptocurrency market capitalization could drop below $3 trillion, down from a peak of $3.7 trillion earlier this month. He further warned that a decline below $94,500 would indicate a break from the six-week uptrend, and falling below $92,000 could place Bitcoin under the 50-day moving average, favoring bearish market participants.
Despite these challenges, Bitcoin has managed to stabilize above $97,400 as the week concludes, even as it records a 4% loss over the past 24 hours.
