Cryptocurrency Market Experiences Sharp Decline Amid Bitcoin ETF Outflows and Derivates Liquidations
Summary:
The value of the cryptocurrency market has decreased significantly, with Bitcoin and Ethereum experiencing substantial losses. This downtrend corresponds with the largest single-day exit from Bitcoin ETFs on record. Moreover, the lack of capital inflows into Bitcoin ETFs has happened ahead of an important Federal Open Market Committee meeting. A considerable market correction has also been observed, and the significant drop in cryptocurrency prices sparked a series of liquidations in the derivatives market. The piece advises all readers to conduct their own research before making investment decisions due to the risks involved.
A decrease in the value of the cryptocurrency market has been observed today, with the total market worth dropping 7.68% to $2.27 trillion as of March 19. A daily performance chart of the total market capitalization. Source: TradingView. Bitcoin (BTC), the dominant cryptocurrency, has led this decline, falling about 7% to roughly $62,650 today. Ethereum's Ether (ETH), the runner-up in the crypto market, has dipped nearly 8% to $3,200 in the same span. The daily price chart for BTC/USD and ETH/USD. Source: TradingView. Other high-ranking cryptocurrencies have shared this poor performance. A list of these cryptos and their 24-hour performances. Source: Messari. Let's dig into the causes of today's downtrend in the cryptocurrency market.
Today's fall coincides with the biggest single-day ejection ever recorded from Bitcoin exchange-traded funds (ETFs). The Grayscale Bitcoin ETF observed ejections totaling $642.5 million on March 18 — its largest to date. In contrast, Fidelity’s Bitcoin ETF experienced its lowest inflow ever, with just $5.9 million recorded, according to Farside Investors data. This has resulted in a net outflow of $154.3 million from Bitcoin ETFs. Bitcoin ETF flow table as per Farside Investors. The slowdown in money pouring into Bitcoin ETFs takes place ahead of the Federal Open Market Committee meeting set for March 20.
As reported by Cointelegraph, the potential for a bull run in the crypto market and Bitcoin in 2024 relies on a shift from the Federal Reserve from tight to loose financial policy. This is more likely to occur if inflation drops below 3% or if there are signs of economic downturn. Therefore, a persistent high-interest rate could cause the rally in the cryptocurrency market to stutter.
Today's fall in the cryptocurrency market is a part of a larger correcting movement that commenced on March 14, after a local pinnacle of approximately $2.72 trillion was hit. The bearish trend signals became noticeable ahead of this correction, as they were seen through the rising market capitalization opposed by a falling daily Relative Strength Index (RSI).
A daily performance chart of the total market capitalization shows the RSI attaining extraordinarily high levels before the correction. This shows overvaluation and results in traders demanding less due to the extremely high prices. A rapid price increase in Bitcoin leading side by side with the Net Unrealized Profit and Loss's (NUPL) sharp raise suggests a prime opportunity for profit-taking. A chart of Bitcoin's net unrealized profit/loss (NUPL). Source: CryptoQuant. From past data, we know that NUPL values greater than 0.6 usually don't last long before significant price adjustments follow.
A significant correction in March has come to notice, with a more extensive downward trend possibly already underway. The levels to be mindful about are discussed here.
The plunging prices of major cryptocurrencies sparked a series of liquidations in the derivatives market today, catching bullish traders off guard and causing a quick round of long position liquidations. Approximately $182 million in positions have been wiped out from the cryptocurrency market today, with the long positions contributing to $140 million of the total sum. Crypto liquidation heatmap. Source: Coinglass. These liquidations can lead to a downturn in asset prices, particularly when trading volumes lack sufficient buying momentum.
This news piece does not serve investment advice nor does it offer any recommendations. Every investment and trading activity carries risk; it is therefore suggested that the readers thoroughly research before taking any decision.
Published At
3/19/2024 2:20:25 PM
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