The cryptocurrency market took a significant hit early Tuesday, with major cryptocurrencies like Bitcoin and Ethereum experiencing notable declines. Despite substantial investments into exchange-traded funds (ETFs) linked to Bitcoin, the cryptocurrency hasn’t seen the expected boost. Over the past 24 hours, Bitcoin dropped by 3.6% to $66,867, a sharp fall from its record high near $74,000 in mid-March. This earlier surge was driven by interest in new spot exchange-traded funds.
Similarly, Ethereum’s price has also been on a downward trend, even after the recent approval of the spot Ethereum ETF by the SEC. Ethereum fell by over 4.2%, now testing the patience of its buyers at $3,500. Other leading altcoins have not been spared: SOL decreased by 4.8%, BNB fell by 5.8%, and both Toncoin and Cardano lost nearly 4%.
The downturn also affected the meme coin sector, which had previously been performing well. Pepe prices dropped by over 3%, while Shiba Inu and Dogecoin prices fell by 5.3% and 4.4%, respectively.
Bitcoin ETF Faces Outflow
A significant factor contributing to Bitcoin’s decline was the outflow from Bitcoin ETFs. On June 10, data showed that Bitcoin ETFs experienced a $64.9 million outflow, ending a 19-day streak of inflows. Notably, Grayscale’s GBTC led with $39.5 million in outflows. Other ETFs like BTCO Invesco Galaxy, Valkyrie’s BRRR, and Fidelity’s FBTC also saw outflows, contributing to a reduction in buying pressure for Bitcoin and pushing its price below the $70,000 milestone.
US Inflation Builds Selling Pressure
Another factor influencing the crypto market downturn is the anticipation of the US inflation report. The Bureau of Labor Statistics is expected to release the Consumer Price Index (CPI) report, which economists predict will show a 0.1% rise in May, down from a 0.3% increase in April. This would be the smallest rise since October, resulting in a year-over-year increase of 3.4%, the same rate as April.
This report, along with the upcoming Federal Reserve’s FOMC statement on economic projections and interest rate decisions, has created a challenging environment for the crypto market. The continuous selling pressure has pushed the market’s fear and greed index from a high of nearly 66 to a recent low of 60, indicating a shift towards a ‘Fear’ sentiment among investors.
ECB’s Rate Cut Created Negative Sentiment
Last week, the crypto market began its decline following the U.S. jobless claims report and was further pressured by the European Central Bank (ECB) rate cut. Although the ECB maintained a neutral stance without clear commitment to further easing, the rate cut reduced the yield advantage on the euro, adding to the bearish sentiment. The ECB’s dovish approach compared to the Fed and the potential for more cuts have amplified the selling momentum in the crypto market.
Verdict
Several factors have converged to drive the cryptocurrency market down today. Outflows from Bitcoin ETFs, anticipation of the US inflation report, continuous selling pressure, and the ECB’s rate cut have all contributed to a bearish market sentiment. As the market navigates these challenges, it remains to be seen how cryptocurrencies will stabilize and whether investor confidence will return. For now, caution and careful monitoring of economic indicators seem to be the prudent approach for crypto investors.
