The Crypto community rejoiced after the crypto winter finally came to an end and Bitcoin rallied to an all-time high of over $70k. However, there is a major concern growing among holders as Bitcoin price recently dropped below $65k suggesting the onset of a bearish market. The effect of BTC price movements was evident as all major Altcoins took a hit falling by double-digit percentages.
As the 24-hour crypto market cap fell by 3.5% amounting to $2.6 trillion, it is creating a tense environment. As the FUD seems to grow, we try to examine a few contributing causes behind the market drop.
Bitcoin ETF Outflows
In the past few days, major ETFs like Fidelity, ARK, and Grayscale observed massive withdrawals amounting to over $145 million that created a selling pressure on Bitcoin. The hefty amount showed uncertainty among investors amid the volatility in the market.
If we observe the on-chain data spot, the total net inflow dropped below $15 billion during the trading period of 109 days. The largest outflow of nearly $91 million was reported by Fidelity Wise Origin Bitcoin Fund. However, investors in a few ETFs observed a neutral stance as they reported zero net inflows, but this was not enough to hold the price above $65k.
The Political Aspect
The U.S. has time and again shown its unacceptance of decentralized cryptocurrencies with stringent laws and unclear regulations. A recent speech by U.S FED (Federal Reserve) Chairman Jerome Powell where he signaled limited interest rate hikes for 2024 caused investors to reconsider investing in cryptocurrencies.
The French connection also contributed to uncertainty as French President Emmanuel Macron called for early elections prompting the traders to move towards the U.S. Dollar which led to its rise. It’s interesting to note that Bitcoin is inversely correlated to the USD, the sudden strengthening of the Dollar might also be a contributing factor.
Also Read: Bitcoin mining could trigger a bull run for BTC
The Mining Factor
Miners are the lifeline of the BTC blockchain, and the results of their activity have always impacted the price. BTC miners experienced a profit drop of nearly 8% due to the falling prices. The hashprice, or the revenue generated from 1 Petahash per second (PH/s) fell from $57.36 per PH to $52.53 PH.
After the mining rewards were reduced after the recent Bitcoin halving, miners faced increased pressure due to the drop in hashprice. To make up for the deficit amid the falling revenue, miners sold Bitcoin to cover their overall costs.
The Ethereum ETF Conundrum
Despite getting a green light from the SEC, no Ethereum ETF has received approval causing a slight uncertainty around the Altcoin. The SEC is stringently monitoring the ETH ETF applications and also issued a few rejections stating compliance flaws.
The delay has left the investors in a flux of emotions running from confusion to fear of market instability. The market is expected to gain positive momentum upon the approval of the much-awaited ETF listing.
What to Expect?
The Bitcoin price stands at $64,565 at press time, however, there is an increase of 63% in the trading volume which stands at $39.1 billion. The hike in the trading volume shows increased activity in Bitcoin with sellers and buyers being very active at the $65k mark.
It is a murky road up ahead with a lot of uncertainty in the market due to the regulatory, geo-political, and volatile market sentiment. After BTC broke the major support of $65k, the bulls are expecting a hike to levels above $70k after a small correction, however, the bears can cause a pullback down to $60k or lower.
Also Read: Bitcoin tumbles to one-month low, but bulls stay hopeful for rebound