After days and days of registering gains and testing the $72,000 price tag, bitcoin reversed its trajectory on Friday and slumped by more than three grand in hours.
The question arises as to why this happened since the inflows into the US-based ETFs keep coming.
The Bitcoin ETF Impact
It’s safe to say that the biggest and most vital news in the cryptocurrency industry this year has been the ETFs the US Securities and Exchange Commission greenlighted in January. Not the halving, which is typically all people can talk about every four years, but specifically the Bitcoin ETFs (the Ethereum ETFs’ impact will be known after they launch).
After all, numerous financial giants, including BlackRock and Fidelity, became issuers of an exchange-traded fund with an underlying asset a cryptocurrency – that’s a sentence that wouldn’t have made much sense five years ago. Now, though, retail investors, as well as institutions, can easily be exposed to bitcoin’s performance without having to worry about storing some mystic keys and remembering complicated passwords.
The effects were immediate as BTC’s price soared by more than 50% in weeks and tapped a new all-time high of $73,800 about two months after the ETFs launched in the States. This was the first time ever the asset had registered a new record before a halving.
The subsequent price movements were also heavily impacted by the inflows or outflows from these financial vehicles. For example, BTC slumped hard in mid-April and early May when investors were taking substantial amounts out almost on a daily basis. Price movements changed when their behavior changed in mid-May and so far in June.
In fact, the ETFs are on their best streak since they saw the light of day. The last time they felt outflows was a month ago – on May 10. This means that they have seen inflows for 19 straight days. Yet, BTC dumped hard on Friday, dropping from $72,000 to $68,500 in minutes.
Why Is That?
Well, if we can’t blame it on the ETF flows, the community has come to a consensus about the main reason. Popular analyst Willy Woo said, “bitcoin won’t get nice things until the last minute degen logs give up chasing the price,” suggesting that there’s too much leverage in the system. This theory was echoed multiple times on Crypto X in the past day or so.
#Bitcoin won’t get nice things until the last minute degen longs give up chasing the price.
If you wanna go long, set your liquidation safely away from being squeezed by the whales. pic.twitter.com/RLHHkgK27X
— Willy Woo (@woonomic) June 7, 2024
Another theory that is quite popular among the community involves profit-taking. Coming just 2% away from its all-time high of $73,800 meant that almost all investors’ funds were in a profit, which many consider a good exit point to take some cash out.
No matter the reason, the fact of the matter is that BTC’s drop caused more than $400 million in liquidations within a day. This should be a warning to over-leveraged traders to be wary about such potential swings in either direction.
Binance Free $600 (CryptoPotato Exclusive): Use this link to register a new account and receive $600 exclusive welcome offer on Binance (full details).
LIMITED OFFER 2024 at BYDFi Exchange: Up to $2,888 welcome reward, use this link to register and open a 100 USDT-M position for free!
The post appeared first on CryptoPotato
