Bitcoin is reeling after a weekend selloff that saw its price drop to a nine-month low of $74,600 on Monday morning, marking an alarming decline of 11% from $84,000 just a day prior. The rapid descent has left many investors questioning their strategies as they navigate the turbulent waters of the crypto market.
The cause of this sharp decline can be attributed to significant outflows from U.S. spot Bitcoin exchange-traded funds (ETFs), which recorded a shocking $2.8 billion in withdrawals over the past two weeks. This marks the second and third-largest outflow weeks ever for these funds, with the latest week contributing $1.49 billion and the preceding week accounting for $1.32 billion in outflows.
Currently, total assets under management for spot Bitcoin ETFs have plummeted to approximately $113 billion, a stark 31.5% drop from their October peak of $165 billion, now holding around 1.28 million BTC. The average purchase price for Bitcoin ETF investors rests at around $87,830 per coin, which places most of these investors at a loss given the current trading price.
Alex Thorn, head of research at Galaxy, highlighted this precarious situation, noting, ‘BTC is trading below the U.S. ETFs average cost basis after the 2nd & 3rd biggest outflow weeks ever. This means the average Bitcoin ETF purchase is underwater.’
Interestingly, while retail investors may be feeling the effects of this downturn, institutional investors appear to be holding steady. Despite Bitcoin’s substantial drop of 38%, ETF cumulative inflow is only down 12% from its peak, indicating a resilience among larger players in the space.
Market Turmoil Triggered by Leverage Liquidations
In a further testament to the market’s volatility, crypto markets faced a wave of forced liquidations, with leveraged positions valued at $510 million wiped out within a 12-hour span. A majority of these losses were from long positions, totaling approximately $391.6 million, illustrating the pressure from bullish bets unwinding in the face of rapid price declines.
Among major cryptocurrencies, Ethereum suffered significantly, dropping more than 8% in just 24 hours, while BNB, XRP, and Solana saw declines between 4% and 6%. Despite the downturn, cryptocurrencies like Dogecoin and TRON experienced more modest losses.
Thin Liquidity Amplifying Market Swings
The weekend’s market conditions proved troublesome, with traditional markets closed and several institutional desks inactive, leading to thinner order books. This lack of liquidity contributed to larger price swings, allowing a relatively small wave of selling to breach the $75,000 support level but subsequently enabling quick recoveries as buying pressure emerged.
A recent analysis highlighted, ‘$BTC first weekly close below the 100EMA is a cause for concern, reminiscent of past patterns which led to significant price declines.’
As the market grapples with fluctuations, it remains under the influence of broader economic conditions. Recent manufacturing data from China revealed mixed signals, and prevailing dollar strength continues to impact trading dynamics. Nick Ruck, director at LVRG Research, warned that Bitcoin might be at risk of falling into a bear market if a recovery does not materialize soon, noting macroeconomic uncertainties and stalled legislative efforts in the U.S. as contributing factors.
As Bitcoin turned back above $76,000 after its brief dip to $74,000, the recent selloff is increasingly viewed as a leverage reset rather than a fundamental change in value. With the current landscape characterized by positioning and market structure influences, rather than intrinsic economic factors, traders will need to remain vigilant as they navigate this unpredictable market.
“Bitcoin Price: Weekend Crash to $74,600 Leaves Average ETF Buyer Underwater“
