Bitcoin prices drew a striking red candle on the daily chart on Friday, plunging nearly 6%, marking a bleak end to the cryptocurrency market this week. BTC has fallen nearly 10% before the weekend, trading as low as $60,433, and has since recovered but is still hovering around $61,592.
The decline was not limited to Bitcoin, but the entire cryptocurrency market was affected. Ethereum fell below the $3,000 mark, and meme coins collapsed, triggering a wave of liquidations in the market. According to statistics, nearly $500 million in long positions were forced to close in the past 48 hours, and the market atmosphere was extremely pessimistic.
What caused this crash in the cryptocurrency market?
1. FOMC inaction shatters the dreams of the cryptocurrency market
The Fed’s performance at the FOMC meeting was undoubtedly a big blow to the market. The market had expected the Fed to cut interest rates to boost the economy, but the Fed postponed the decision, saying that the next rate cut might have to wait until September. This news quickly shattered the market’s optimism and led to a bearish trend in the cryptocurrency market.
2. Bitcoin ETF funds are flowing out in large quantities
The outflow of funds from Bitcoin ETFs also exacerbated the panic in the market. After the FOMC meeting, the total daily net inflow of all spot Bitcoin ETFs in the United States turned negative, reaching US$237.45 million. Among them, the FBTC fund under Fidelity had the largest outflow, reaching US$104.1 million. The outflow of a large amount of funds has undoubtedly brought heavy pressure to the crypto market.
3. Mt. GOX begins distribution
Mt. Gox's Bitcoin distribution also exacerbated the market's selling pressure. Earlier this week, Mt. Gox distributed billions of dollars worth of Bitcoin to creditors, 40% of which was sent to exchanges. While this has driven a short-term rise in BTC prices to some extent, the subsequent transfer of $3 billion of Bitcoin from the $9 billion in due payments to exchanges has triggered a wave of selling, further exacerbating the market's bearish trend.
4. Decline in Bitcoin open interest warns of cross-border trade
However, it is worth noting that despite the current market crash, there are some signs that Bitcoin and the cryptocurrency market may soon recover.
For example, on Binance, the largest centralized exchange, the top traders for the BTC/USDT pair show a long-to-short ratio (open interest) of 1.8582. This means that among the top traders, long positions have a clear advantage.
In summary, the collapse of the Bitcoin and cryptocurrency markets is the result of a combination of factors. Although the market may still face certain pressures and challenges in the short term, in the long run, with the continuous development of technology and the gradual maturity of the market, the cryptocurrency market still has huge potential and room for development.
(Personal opinion, not a recommendation)
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