Bitcoin Suffers Record Fall Since FTX Crash

The crypto market, in particular Bitcoin, experienced a significant correction on Tuesday, recording its biggest one-day percentage fall since November 2022, following the collapse of the FTX platform. Record outflows from BTC spot ETFs appear to have catalyzed this fall.

Bitcoin and major cryptocurrencies in free fall

The price of Bitcoin fell more than 8% on Tuesday dropping below the $62,000 mark, according to data from TradingView. This sharp drop represents the sharpest daily correction since November 9, 2022, when prices plunged by over 14% following the collapse of FTX.

Massive outflows from exchange-traded funds (ETFs) played a catalytic role in this correction. According to provisional figures from Farside, BTC spot ETFs experienced a record net outflow of $326 million on Tuesday. The previous day, the Grayscale ETF had already experienced an unprecedented withdrawal of $643 million.

In addition to the ETF exodus, trader and economist Alex Kruger points the finger at other elements which precipitated the fall:

  • Excessive leverage weighs on financing.
  • The decline of Ether, the second-largest crypto in terms of capitalization, against a backdrop of uncertainty regarding SEC approval of a Spot ETH.
  • The “speculative mania” surrounding Solana, described as a “shitcoin” by Kruger.

Furthermore, the crypto market seemed overheated in early March, with traders willing to pay over 100% annualized funding on futures contracts to maintain their bullish bets, according to the analyst. Such an imbalance often presages a correction to come.

The Fed, arbiter of the markets

Investors’ eyes now turn to the decision of the Federal Reserve (Fed) on interest rates this Wednesday, followed by a press conference by the Fed Chairman Jerome Powell.

Greg Magadini, Director of Derivatives at Amberdata points out that the strength of the economy and higher-than-expected inflation argue for a Fed that remains “hawkish”, dismissing prospects of a rate cut this year. This firm tone, coupled with the recent rise in Treasury yields and the dollar index, is weighing on the appeal of risky assets such as cryptocurrencies.

Bottom line, the crypto market is going through a turbulent period with a significant correction driven by the fall of bitcoin and the major cryptocurrencies. Record outflows from BTC spot ETFs, excessive leverage in the market and the waning appeal of risky assets have all contributed to this collapse.

Furthermore, as the “Halving” approaches, Bitcoin could undergo a more pronounced correction, a recurring scenario during previous cycles of miners’ supply reduction. Historically, the market has always experienced a consolidation phase ahead of this event, before rebounding thereafter. The current purge could therefore mark the low point before the next bull run so eagerly awaited by investors.