Bitcoin ETFs Experience Largest Daily Outflows Amid Fed Policy Shift
Bitcoin ETFs faced record outflows of $680 million on Thursday, due to heightened selling pressure following the Fed’s cautious outlook on interest rate cuts. This triggered a significant decline in bitcoin value, falling below the $100,000 mark after recent all-time highs. Analysts caution that ongoing market volatility could persist as trading sentiment shifts.
On Thursday, bitcoin exchange-traded funds (ETFs) experienced unprecedented outflows amounting to $680 million, the largest daily decline recorded to date, as investors reacted to the Federal Reserve’s modified outlook on interest rates. This massive outflow resulted from heightened selling pressure following the Fed’s announcement, which signaled only two quarter-point rate cuts for the coming year compared to prior expectations of four. As a result, bitcoin’s value fell drastically, dropping over 9% and trading around $96,000 on Friday morning, amidst broader declines in risk assets across the market.
The recent volatility in the cryptocurrency sector can be attributed to both the Fed’s updated economic projections and potential seasonal profit-taking by institutional investors who have seen substantial gains this year. Although bitcoin remains significantly higher year-to-date, the pressure from the outflows is likely to exacerbate bearish sentiment, with analysts advising caution regarding further declines. Joseph Dahrieh of Tickmill noted that the decline might negatively impact broader market sentiment, especially as bitcoin fell below the crucial $100,000 threshold.
Moreover, substantial liquidations amounting to over $240 million in various long and short positions occurred within a single day, contributing to further market instability. Market analysts have warned that should prices continue to dip, there could be significant implications for the cryptocurrency market, with potential drops in total market capitalization. Speculation remains that continued bearish movements could drive values below key support levels, leading to increased volatility and risks for both bitcoin and the broader crypto landscape.
The recent volatility in the cryptocurrency market stems from external economic factors, notably the Federal Reserve’s cautious positioning regarding future interest rate cuts. After an earlier expectation of multiple reductions next year, revised projections have instigated significant investor reaction. Bitcoin, which has experienced considerable growth year-to-date, is now facing selling pressure as traders reassess their strategies in light of macroeconomic changes. Additionally, the recent record outflows from bitcoin ETFs signal a concerning trend that may influence trading patterns moving forward.
In summary, the record outflows from bitcoin ETFs highlight a significant shift in investor sentiment stemming from the Federal Reserve’s revised monetary outlook. The recent decline in bitcoin’s value, coupled with substantial liquidations, suggests potential for continued volatility and bearish trends in the cryptocurrency market. Analysts advise vigilance as key price levels are tested, indicating uncertainty in the approaching trading sessions.
Original Source: markets.businessinsider.com
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