Cryptocurrency markets took a downturn on Tuesday, with Bitcoin (BTC) leading the decline despite recent positive developments like inflows into Bitcoin ETFs. The leading cryptocurrency dropped by 3.6% over the past 24 hours, falling to $66,867 which marks a significant slide compared to its mid-March record high near $71,000. This downturn comes even though capital has been flowing into Bitcoin ETFs, which some anticipated would provide a bullish boost.
On the other hand, altcoins like Ethereum (ETH) experienced a steep decline despite the recent SEC approval of a spot Ethereum ETF. The price of ETH dropped by over 4.2% in the last 24 hours, currently hovering around $3,500, testing buyers’ patience. Even the previously hot meme coin sector wasn’t spared. The price of Pepe dropped by over 3%, while Shiba Inu and Dogecoin fell by 5.3% and 4.4%, respectively. This broad-based sell-off highlights the market’s vulnerability.
Bitcoin’s recent struggles are surprising considering it touched a record high of $73,798, potentially boosted by inflows into US exchange-traded funds. However, it failed to sustain the momentum. Upcoming key economic events in the US, like the inflation data and the Federal Reserve’s outlook on Wednesday, could lead to a longer period of high-interest rates, creating a challenging environment for assets like cryptocurrencies.
During this pullback, over $213 million worth of leveraged derivatives trading positions across the crypto market were liquidated. Liquidations occur when an exchange closes a leveraged position because a trader either partially or completely loses their initial margin. This happens when the trader fails to meet margin requirements or lacks sufficient funds to maintain the position.
US Inflation & selling pressure
Reason behind the pullback is investors’ US inflation building pressure on selling. The crypto market is facing some unexpected headwinds. The US jobs report came in much stronger than anticipated, revealing a significant jump in new jobs. This positive news for the economy actually caused some jitters in the stock market and pushed interest rates higher. With the potential for these higher rates to stick around, Bitcoin took a hit and fell from its recent high.
Adding up to the uncertainty, everyone’s waiting on Wednesday for the release of the US inflation data and the Federal reserve meeting. These upcoming events could significantly impact the crypto market, so investors are watching closely.
Chinese regulations shadow over crypto
Cryptocurrency markets face additional pressure due to recent regulatory actions in China. The People’s Bank of China (PBOC) issued an online statement on Friday, declaring virtual currency-related business activities “illegal financial activities.” According to the statement, these activities will be investigated for potential criminal liability.
This notice has sent shockwaves through the financial sector, particularly impacting cryptocurrency trading. The PBOC further expressed concerns about “seriously endangering the safety of people’s assets.” While cryptocurrency has been illegal in China since 2021 Beijing has intensified its crackdown this year. The government has warned banks to halt transactions involving crypto and shut down a significant portion of the country’s vast network of Bitcoin miners.
Even though the market is down, some analysts see potential for a quick recovery. Historically, Bitcoin has bounced back from pullbacks several times. Given the current conditions, this could be an opportunity to buy cryptocurrencies at a discount for investors with a long-term perspective. It’s important to remember that cryptocurrency is a volatile asset class, and there’s no guarantee of short-term gains.
Where’s bitcoin heading?
Experts believe that the current bearish sentiment in the market stems from uncertainties surrounding upcoming events and potential economic impacts. Also, the recent ECB rate cut has added to this downturn. However, despite these challenges, institutional interest in crypto appears to remain steady, as evidenced by consistent inflows into Bitcoin spot ETFs.
Wrapping up
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