Crypto Washout – Bitcoin experienced a significant downturn on Wednesday, dropping nearly 6% and marking its worst monthly performance in April since late 2022. Investors began pulling funds from cryptocurrencies in anticipation of the Federal Reserve’s upcoming interest rate decision. The value of the world’s most traded cryptocurrency fell by almost 16% in April, as profit-taking followed the surge that took bitcoin’s price to record highs above $70,000.
Bitcoin’s Decline
Bitcoin dropped by as much as 5.6%, reaching its lowest point since late February. It was last recorded at $57,001, down 4.8%. Ether, the second-largest cryptocurrency by market capitalization, also experienced a decline, falling 3.6% to $2,857, its weakest point since February.
Bitcoin’s price is now 22% below the March record of $73,803, technically placing it in a bear market. However, it is still up 35% so far this year and has doubled since the same time last year, primarily due to the billions of dollars flowing into newly minted exchange-traded funds (ETFs) since January.
Reasons Behind the Decline
Fineqia research analyst Matteo Greco attributed the recent downturn to increased profit-taking by investors who entered the market during the downturns of 2022 and 2023, as well as ETF investors who saw significant price appreciation on their shares after entering the market in the early weeks of 2024.
Impact on Crypto-Related Stocks
The broader crypto market also faced challenges. In U.S. premarket trading, shares in crypto exchange Coinbase dropped by 4.6%, while shares in crypto miners Riot and Marathon Digital fell by 4.2% and 4.3%, respectively.
Macroeconomic Factors
The Federal Open Market Committee (FOMC) is expected to maintain interest rates at their current level, but investors are increasingly skeptical that the central bank will cut rates at all this year. This sentiment has impacted interest rate-sensitive assets like Crypto Washout emerging market stocks and bonds, and even commodities.
As a result, the 10 largest U.S. spot bitcoin ETFs are facing their largest weekly outflow since their inception in January. Outflows this week have reached $496 million, with a slowdown in flows into BlackRock’s iShares Bitcoin Trust, the largest bitcoin ETF in terms of holdings, contributing to this trend.
Altcoins and Bitcoin’s Halving Event
Smaller altcoins, which sometimes benefit from a decline in bitcoin, have also been hit hard. Solana’s sol token has lost nearly a quarter of its value over the last seven days
as have meme coins like dogecoin and shiba inu
which gained popularity in 2021, partly thanks to endorsements from Tesla owner Elon Musk.
Bitcoin’s recent halving event, which took place in April and aimed to reduce the rate at which new bitcoins are created
has not helped stabilize the price. Since April 20, when the halving event occurred, bitcoin has dropped around 15%.
Outlook and Potential Reversal
From a technical perspective, Alex Kuptsikevich, a senior market analyst at FXPro
noted that bitcoin’s decline has entered a new stage. May is traditionally a weaker month for bitcoin
and the recent downturn brings attention to potential price targets around $55,700 and $51,000-$52,000.
However, the FOMC announcements later today and the release of monthly jobs data on Friday could have a significant impact on the future direction of bitcoin’s price. Depending on these outcomes
the downtrend could either accelerate or reverse, making the coming days critical for the Crypto Washout market.