Today, Bitcoin is recording its lowest levels in more than two months, with a decline to $56,500, which also prompted the entire cryptocurrency market to record sharp losses as well.
These extended losses since yesterday led to the liquidation of about half a billion dollars from long positions in Bitcoin futures during approximately the previous 36 hours, according to CoinGlass.
These severe losses and liquidations also weakened traders’ sentiment about the future and pushed the premiums of many May and June futures contracts below zero yesterday afternoon, according to Deribit.
These declines come amid weak sentiment in financial markets in general, as the S&P 500 index fell by 1.5%, with pessimism about the possibility of cutting interest rates this year. According to current expectations, we may not see any rate cut before next September, and this does not seem very likely either, given the acceleration of inflation, economic activity, and the resilience of the labor market.
Today will see more labor market numbers, both ADP non-farm employment and job openings (JOLTS), in addition to the reading of ISM manufacturing PMI.
We also conclude today with the Fed’s decision on the interest rate, which interest rate derivatives traders expect will not change in the current rates, according to the CME FedWatch Tool. However, the focus will be on the speech following the decision and talking about monetary policy makers’ vision of the current inflation path and the likely path for the rest of this year.
Crypto market is usually not affected by short-term movements in stock markets or surprises in economic data, but a noticeable decline in risk appetite in general leads to sharp declines simultaneously. So, crypto investors may give more focus to the monetary policy path.
This weak sentiment was reflected in the weakest performance recorded by US Bitcoin spot ETFs, which recorded net outflows, of around $70 million, for the first time since their launch even excluding GBTC outflows. With the addition of outflows from GBTC, it amounted to $161.6 million, according to SoSo Value.
The markets were also negatively affected by the Bitcoin and Ethereum spot ETFs that were introduced in the Hong Kong market, the performance of which was interpreted differently in the news headlines and the crypto community.
While trading volumes and inflows into these funds were small when compared to those from the US, the size of the two markets was completely different and the timing was not in favor of the Hong Kong funds. The interaction with this event was of the type of selling news, as happened in January.
Crypto performance was also not positive when the ETFs were initially launched in the US in January, but the massive inflows into them that surpassed many other established asset ETFs eventually pushed Bitcoin to higher record levels. Therefore, we will also monitor investors’ appetite for new ETFs in Asia.
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