Bitcoin Value Plummets Prior to Halving Event Amid ETF Outflows and Rising U.S. Dollar
Summary:
Bitcoin's value experienced a dip to $62,570 on March 22, ahead of the anticipated Bitcoin halving event. This drop is attributed to continuous outflows from Bitcoin ETFs and a strong U.S. dollar. The U.S Dollar Index, which tracks the dollar against global currencies, increased by 1.3% after strong economic data from the U.S. Bitcoin ETFs experienced the fourth straight day of capital outflows on March 21. Negative impacts of this economic activity include more than $53 million in BTC long liquidations in the last 24 hours. As a result, many investors are liquidating their holdings, contributing to the current price decline.
The value of Bitcoin (BTC) saw a drop to a low of $62,570 on March 22, a decline just before the highly-anticipated Bitcoin halving occurrence. The robust drive that pushed BTC to its highest recorded value of $73,835 on March 14 appears to be receding, as it is currently 5.6% below the commencement value of the day at $65,466. BTC's value is influenced by continuous drains from Bitcoin ETFs and the rising strength of the United States dollar.
The increasing strength of the U.S. currency is significant in the scenario. The U.S. Dollar Index (DXY) gauges the performance of the U.S. dollar against major global currencies, and it has witnessed a 1.3% increase from its low of 102.79 on March 21 to the present value of 103.97, following solid U.S economic data.
Economic data provided by PMI surveys indicate that sustained private sector activities and increasing input price pressure contributed to the momentum needed for the DXY to kickstart its revitalization. The upturn in the dollar is also linked to a reduction in the Initial Jobless Claims, which dropped to 210,000 in the week that ended on March 16. The U.S. Dollar Index could potentially rise by over 0.6% in a typical V-shaped recovery pattern heading towards 2024 highs over 104.
There was a steady outflow of funds from Bitcoin ETFs for four consecutive days ending March 21, marking the longest consecutive withdrawal since its inception trade on January 11. There were outflows of over $538.8 million from Grayscale’s GBTC on March 21, contrasted with inflows of $233 million into Blackrock's IBIT fund. On the other hand, Fidelity’s Bitcoin ETF FBTC observed a mere inflow of about $2.9 million, leading to a net outflow from Bitcoin ETFs of $93 million.
There are speculations that the consistent outflows from Bitcoin ETFs and the selling pressure experienced by BTC are mainly attributable to substantial GBTC outflows, as many investors are either redeeming their investments or switching to more affordable options after initially having their funds in GBTC before its conversion to a spot ETF.
There seems to be a rapid reduction in the BTC futures market, which might be a contributing factor to the speed of the recent price decline. In the last 24 hours, CoinGlass data revealed that over $53 million worth in BTC long positions, out of a total of $250 million across the cryptocurrency market, and $173 million of which were long liquidations, have been liquidated. Long liquidations are commonly a result of a sudden drop in the asset's price, causing traders who had taken long positions in anticipation of a rise in the asset's value to incur losses.
Glassnode, the blockchain data and intelligence platform indicates the volume of Bitcoin transferred to exchanges had a significant rise on March 21. More inflows to a certain asset typically signal an increase in selling pressure within the market. With a rising amount of BTC being sent to recognized exchange wallets, it appears that investors are cashing out at the prevailing rates, leading to the price plunge. Please, note that this article does not offer investment advice or suggestions. Every investment or trade involves risks, and individuals should thoroughly research before making any decisions.
Published At
3/23/2024 2:42:04 AM
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