Bitcoin’s daily chart has painted a stark picture with a massive red candle signaling a sharp 6% drop this Friday. The biggest cryptocurrency has plunged nearly 10% over the week, closing at $61,592 after an intraday recovery.
Despite briefly reclaiming the $61,000 mark from a low of $60,433, the bearish tide has caused a ripple effect throughout the crypto market. Altcoins, including Ethereum, have also felt the impact, with Ethereum slipping under $3,000 and meme coins crashing. The market is reeling from a wave of liquidations, with nearly $500 million in long positions wiped out in just 48 hours.
So what’s behind this sudden downturn?
FOMC Meeting Delay Hits Hard
The Federal Open Market Committee (FOMC) meeting was a major event for the crypto market, initially fueling optimism due to a promising rally before the meeting and positive July Consumer Price Index (CPI) data.
There was excitement about potential Bitcoin purchases by major U.S. pension funds through ETFs. However, the long-awaited rate cut was postponed, with no new decisions expected until September.
Huge Bitcoin ETF Outflows
On August 2, Bitcoin ETFs saw a dramatic shift with net daily outflows reaching $237.45 million. Fidelity’s FBTC fund led the pack with a $104.1 million outflow, followed by Ark’s ARKB and Grayscale’s GBTC with outflows of $87.68 million and $45.95 million, respectively. The only exception was BlackRock’s IBIT fund, which saw a positive inflow of $42.8 million.
Mt. Gox Bitcoin Distribution
The ongoing distribution of Bitcoins by Mt. Gox to creditors has fueled the fire. Of the $9 billion due, $3 billion has already been sent to exchanges. This distribution has increased selling pressure, contributing to the market’s downturn.
Declining Bitcoin Open Interest
Bitcoin’s Futures Open Interest has dropped by 5.17% in the past 24 hours, signaling a waning market confidence. The OI-weighted funding rate has also fallen sharply to 0.0085%. Despite this, Binance’s BTC/USDT Long-to-short ratio remains at 1.86, suggesting the market might see a rebound soon.
The recent Bitcoin plunge highlights a convergence of factors—FOMC meeting delays, massive ETF outflows, and Mt. Gox Bitcoin distributions—causing a significant market shakeout. Despite a substantial dip, the market’s resilience, indicated by Binance’s long-to-short ratio, suggests a potential rebound. Could this downturn be a temporary setback, or is it the start of a more prolonged bearish trend?
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