The recent price action of Bitcoin has seen a significant correction, pushing it down by approximately $13,000. This decline can be attributed to the fear among US investors following comments made by Powell during the Federal Open Market Committee (FOMC) meeting. They collectively withdrew over $670 million from spot Bitcoin exchange-traded funds (ETFs) within just one day.
The situation further deteriorated when Powell announced a 25 basis point reduction in key interest rates and cautioned that there may not be as many rate cuts by 2025 due to rising inflation concerns. He also mentioned that the Federal Reserve is prohibited from buying or storing Bitcoin, contradicting a promise made by former President Donald Trump to promote cryptocurrencies.
As a result of these factors, Bitcoin’s price dropped from above $105,000 to below $96,000 in a matter of hours on Wednesday evening. It rebounded slightly on Thursday but eventually fell back again during US trading hours. The liquidation value exceeded $1 billion during this period. According to data from FarSide, US investors appear to have panicked about their exposure to riskier assets such as Bitcoin and withdrew funds en masse from Bitcoin ETFs.
In fact, December 19th saw the highest ever daily outflow from these financial vehicles in their near-year history. Interestingly, even Ethereum ETFs experienced outflows totaling $60.5 million despite having gone without a single net outflow day since November 21st. This suggests that broader market sentiment towards cryptocurrencies has soured significantly in recent days.
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