Bitcoin sank to a two-week low before paring losses as demand for dedicated US exchange-traded funds dries up and investors question the Federal Reserve’s scope to lower interest rates quickly.
The digital asset has declined almost every day since hitting a record high just shy of $73,798 on March 14, stoking questions about whether the cryptocurrency has peaked for the time being. Bitcoin fell as much as 4.6% before trading little changed at around $63,350 on Wednesday.
Demand has cooled for US spot-Bitcoin ETFs that launched with much fanfare on Jan. 11. The products have garnered a net inflow of $11.7 billion so far but the group as a whole suffered its biggest outflow on Tuesday.
Exits from the Grayscale Bitcoin Trust drove the $326 million efflux, while subscriptions shriveled for rival offerings from the likes of Fidelity Investments and BlackRock Inc., according to data compiled by Bloomberg.
Bitcoin’s slide comes amid uncertainty over whether above-target inflation will lead Fed policymakers to trim rate-cut projections at their meeting on Wednesday, portending a less favorable backdrop for speculators.
While Bitcoin’s recent struggles are partly to do with the Fed outlook, “the commitment of some of the latecomers that bought in above $60,000 — expecting a never-ending stream of inflows into the new Bitcoin ETFs — is now being tested,” said Tony Sycamore, a market analyst at IG Australia Pty.
The wider crypto market has lost roughly $460 billion since reaching $2.9 trillion last week, based on data from CoinGecko. Tokens like Ether and BNB, as well as meme-crowd favorite Dogecoin, are all sitting on losses for the period.
A washout in bullish bets using derivatives may have further to run, pointing to a potential impediment for any quick recovery in the digital-asset market, according to K33 Research.
“Risks are thus still considerable for continued amplified downside volatility stemming from long liquidations,” K33 Research’s Anders Helseth and Vetle Lunde wrote in a note.
Coinglass data show about $511 million worth of bullish crypto wagers were liquidated in the past 24 hours — one of the heaviest such drops in the past two weeks.
Digital-asset optimists continue to anticipate a fillip for Bitcoin from an upcoming reduction in the token’s supply growth. But a downbeat mood is prevalent currently, underlined by slumps this week in crypto-linked stocks such as US exchange operator Coinbase Global Inc., Bitcoin holder MicroStrategy Inc. and Japanese financial services company Monex Group.
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