Over the last 24 hours, Bitcoin (BTC) has experienced a 5% drop, leaving its current price around $66,000. The largest cryptocurrency even temporarily dipped below this psychological level.
This downward movement appears to be mainly due to continued outflows from the Grayscale BTC fund and disappointing news about the US economy.
Millions flow out of Grayscale Bitcoin fund
Last Monday, Grayscale’s Bitcoin fund, better known as GBTC, experienced an outflow of more than $300 million in assets. In addition, net outflows of nearly $86 million were observed across the board from Bitcoin Spot Exchange Traded Funds (ETFs).
Inflows into the popular BTC funds of BlackRock and Fidelity were insufficient to offset GBTC’s losses.
The capital outflow from these funds forces asset managers to sell bitcoins, often in large quantities given the amounts involved. This usually leads to a significant drop in the price of BTC.
Disappointing inflation figures in the United States
Moreover, the prospects for the US economy are becoming more muted. Christopher Waller, an official at the Federal Reserve (Fed) — the central bank of the United States — has indicated that the possibility of a rate cut by the institution could be postponed. This decision is based on disappointing inflation figures.
The Fed has for some time tried to curb inflation by keeping interest rates high.
As long as inflation does not decrease, interest rates will remain high. This means that borrowing remains relatively expensive, which can put additional pressure on the economy. This, in turn, could have negative consequences for both the stock and crypto markets.
Major crypto liquidations
The recent price drop has also triggered a wave of crypto liquidations. Within a span of 24 hours, we saw leveraged positions worth $500 million liquidated, forcing traders to sell their positions. This affected more than 155,000 traders in total. Such liquidations often lead to a chain reaction, which pushes the price even further down.
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