Bitcoin's Bearish Plunge

Bitcoin's slide is erasing weeks of gains. Meanwhile, the total crypto market cap faces its largest string of declines since spot BTC ETF approval proved to be a sell the news event. Will bulls come to the rescue, or is there more downside to come?

Outflows from the Grayscale Bitcoin Trust (GBTC) are speeding. Yesterday, they amounted to $642.5M, surpassing the prior record of $640.5M set on January 22, causing a net outflow from all BTC spot ETFs of $154.4B.

After yesterday’s performance, GBTC has now experienced the most outflows of any ETF since the March 2009 stock market lows set in the wake of the Global Financial Crisis, a dismal performance record Grayscale now hopes to reverse by promising to lower its exorbitantly high fees over time.

 The sell pressure from these flows was reflected in crypto prices yesterday, with Bitcoin experiencing a peak-to-trough decline of nearly 9% off the Monday opening of US stock markets.

Alongside the dip in prices has come liquidations.

A total of $635M in leveraged trades were forcibly closed over the past 24 hours, with 80% of them coming from the long end, allowing funding rates across the board to reset to normalcy and providing a supportive environment for traders looking to take new longs.

Despite the dip down in BTC, new hopes for institutional crypto adoption are emerging after a $1.4T Japanese state pension fund – the world’s largest – announced that it is seeking information on Bitcoin as it looks to diversify its portfolio.

Markets are demonstrating strong risk-on sentiment, making it clear that we are in a bull market. However, it should be noted that a standard bull market correction of 30% would send BTC as low as $51k, providing room for further downside.

Tomorrow’s Federal Reserve interest rate decision could be a major volatility catalyst for markets, as recent hot inflation prints could push the Federal Open Markets Committee (FOMC) to adopt a more hawkish policy stance than in past months. This shift would delay market participants’ expectations for rate cuts and pour water on a risk rally that has continued uninterrupted since last October.

The likelihood of a rate reduction this month has plummeted to a mere 1%, a drastic decrease from the 90% probability of beginning in March that markets had priced in at last year's end.