- As the volatility of the cryptocurrency market increased, Bitcoin momentarily dropped below $66,000, reaching a low of about $65,700.
- With $519.2 million in net withdrawals, U.S. spot Bitcoin ETFs have now lost 12 days in a row.
- Ethereum ETFs saw pressure as well, reporting net outflows of $90.2 million for the 16th consecutive day.
- ETF withdrawals, forced liquidations, and macroeconomic risk-off sentiment are all blamed by analysts for the cryptocurrency sell-off.
- Higher oil prices and escalating tensions in the Middle East put additional strain on riskier assets like Ethereum and Bitcoin.
Why is Bitcoin collapsing right now? The largest cryptocurrency in the world momentarily dropped as institutional investors kept withdrawing money from spot Bitcoin ETFs, and rising geopolitical unpredictability caused financial markets to become more risk-averse.
While traders continue to process Strategy’s recent bitcoin sale and more general geopolitical anxiety, Ethereum and other key cryptocurrencies also saw a drop.
BTC fell to a low of about $65,700 Tuesday night before slightly rising to $66,460 as of 10:30 a.m. IST on Wednesday. and was trading at around $67,274 at the time of writing, recovering a significant portion of its earlier losses.
Source: TradingView
Ethereum (ETH) dropped 7.1% to $1,849, BNB down 7.2% to $635, XRP dropped 4.8%, and Solana dropped 7.7%.
Forced Liquidations Add Fuel To Bitcoin’s Downward Spiral
Market Predicts that U.S. spot bitcoin exchange-traded funds had $519.2 million in net outflows on Tuesday, extending their negative flow streak to 12 days. Additionally, Spot Ethereum ETFs reported net outflows of $90.2 million, their 16th consecutive day of outflows.
Zeus Research analyst Dominick John told The Block that aggressive long liquidations, significant institutional exchange-traded fund outflows, and general macro de-risking that decreased market liquidity were the primary causes of the cryptocurrency collapse.
According to John, “forced unwinds in leveraged positions accelerated downside pressure within the major assets.”
Additionally, according to Andri Fauzan Adziima, research lead at Bitrue Research Institute, recent airstrikes in the Middle East increased oil prices and heightened risk-averse sentiment, “sparking massive long liquidations, accelerating ETF outflows, and exposing $BTC’s high-beta risk-asset behavior over safe-haven traits.”
Notably, Brent crude increased 1.04% to $97.07 per barrel, while WTI crude futures increased 1.13% to $94.82.
Nikkei Hits Record High As Bitcoin Faces Selling Pressure
Asian stock markets saw uneven trading, with some major indices rising to all-time highs and others falling. The bitcoin market is still fixated on Strategy’s latest Bitcoin sell despite more general market volatility.
Many investors are still evaluating the move’s importance, according to Peter Chung, Head of Research at Presto Research. Strategy’s move to sell some of its holdings has drawn attention from the cryptocurrency market since it has long been regarded as one of the biggest corporate supporters of Bitcoin.
Although it’s still unclear if the transaction was the main cause of Bitcoin’s recent underperformance, Chung pointed out that some market participants would cite it as one explanation.
History Suggests Bitcoin Could Bounce Back Faster Than Expected
According to Chung, how the market interprets the relatively tiny sale, which Saylor referred to as an “inoculation,” will determine whether it proves to be “the straw that breaks the camel’s back” or a wise defensive maneuver.
Chung continued, “It is unclear whether this alone explains $BTC’s underperformance.” “The decoupling started a couple of weeks earlier, most likely driven by selling pressure to fund rotational buying into Al-themed equities.”
John of Zeus predicted that the downward pressure on cryptocurrency markets might last until June, but Adziima pointed out that it might subside in a matter of days to a week or two “once headlines cool or de-escalation hints emerge. “This cycle’s event-driven troughs have quickly recovered,” Adziima continued.
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