Bitcoin Crypto

Why is Crypto Down Today? Bitcoin Drop Due to Profit Taking, ETF Outflows & a Stronger Dollar

3 weeks ago
Bitcoin Ethereum News

TLDR

  • Major cryptocurrencies like Bitcoin and Ethereum experienced significant declines, with Bitcoin falling below $66,000 and Ethereum dropping to $3,400.
  • Altcoins such as Dogecoin and Solana suffered losses of up to 9% in the past 24 hours.
  • Factors contributing to the market downturn include profit-taking, outflows from U.S.-listed Bitcoin ETFs, and a stronger U.S. dollar.
  • Nine ETFs collectively decreased their Bitcoin holdings by 3,169 BTC (approximately $208 million), with Fidelity and Grayscale being notable sellers.
  • Despite the market decline, some analysts see opportunities in the altcoin market, particularly with the Others.D index approaching a crucial support trendline.

The cryptocurrency market experienced a significant downturn on Tuesday, with major tokens like Bitcoin (BTC) and Ethereum (ETH) leading the decline. Bitcoin fell below the $66,000 mark, reversing its gains from the previous day, while Ethereum dropped to $3,400, erasing last week’s gains.

The market-wide sell-off was driven by a combination of factors, including ongoing profit-taking and net outflows from U.S.-listed Bitcoin exchange-traded funds (ETFs).

Altcoins were hit particularly hard during this market slump, with notable losses in tokens such as Dogecoin (DOGE) and Solana’s SOL, which lost as much as 9% in the past 24 hours, according to CoinGecko data.

Other tokens like Ton Network’s TON and BNB Chain’s BNB also experienced losses, although BNB outperformed with a decline of just 1.5%.

Several factors have contributed to the current market downturn.

Neil Roarty, an analyst at investment platform Stocklytics, pointed to the political uncertainty triggered by Emmanuel Macron’s surprise decision to call a snap election in France, which strengthened the U.S. dollar as traders exited the euro.

A strong dollar tends to put downward pressure on Bitcoin prices. Roarty added that considerably lower interest rates and a weaker dollar would be needed to push BTC closer to the $70,000 mark.

FxPro senior market analyst Alex Kuptsikevich warned of generally bearish sentiment, noting that even favorable developments regarding Ethereum ETFs did little to buoy ETH prices.

He cautioned that increased liquidity on weekdays might play into the hands of bears rather than bulls by increasing selling interest.

The recent bloodbath saw Bitcoin dropping to new one-month lows of $64,000, with a push past $67,000 failing to sustain.

The short-term holder realized price (STH-RP), currently at $63,700, has traditionally supported BTC price action since the bull market began in early 2023. Analysts are closely watching this level to gauge market sentiment.

The substantial reduction in Bitcoin holdings by major ETFs has likely contributed to the current downturn.

According to Lookonchain, nine ETFs collectively decreased their Bitcoin holdings by 3,169 BTC, equivalent to approximately $208 million. Fidelity and Grayscale were among the notable sellers, reducing their holdings by 1,224 BTC ($80.34 million) and 936 BTC ($61.4 million), respectively.

The altcoin market has been hit particularly hard by the recent downturn, with mid-cap and low-cap coins plummeting back to their previous bear market lows.

However, some analysts see opportunities amidst the chaos. Anup Dhungana noted that the Others.D index, which tracks the performance of altcoins excluding the top 10, is on the verge of retesting a crucial support trendline that marked the bull cycle bottom for altcoins. A successful retest could potentially signal a reversal in the current downtrend.

While the current conditions may seem grim, experienced investors view this downturn as an opportunity to accumulate promising assets at discounted prices, while remaining cautious of further downside risk.

Source: https://blockonomi.com/why-is-crypto-down-today-bitcoin-drop-due-to-profit-taking-etf-outflows-a-stronger-dollar/