Bitcoin
Bitcoin drops 4% to $61,000, witnessing second-worst weekly drop; What’s behind the dive?
The world’s largest cryptocurrency Bitcoin witnessed a drop of over 3% on Monday, falling to the $61,000 level. Losses are mounting in the crypto market after its second-worst weekly decline in 2024, driven by decreased demand for Bitcoin exchange-traded funds and uncertainty surrounding monetary policy.
As of 11:44 a.m. Monday in London, Bitcoin fell 4% to $61,153, marking its lowest point in more than a month. The leading cryptocurrency by market cap was impacted by a six-day streak of outflows from dedicated US ETFs.
The cryptocurrency maintains a market value of around $1.2 trillion. Despite the prevailing recession, Bitcoin’s open interest has experienced a slight increase of 0.59%, reaching a current valuation of $19.1 billion.
“The crypto market is currently experiencing a downturn, leaving many people confused and scared about their next steps. BTC is now approaching the critical level where many will give up on this cycle. BTC is playing much the same role that gold played in the early days of the banking system. The current drop is due to three main reasons such as minors selling BTC to fuel their mining activities, Germany is selling 3 billion dollars worth of Bitcoin and Mt. Gox, the former cryptocurrency exchange that advertises payments in bitcoin money in July,” said Avinash Shekhar, Co-Founder & CEO, Pi42.
What’s behind Bitcoin’s fall?
Recent market sentiment indicates that investors are adopting a cautious approach, refraining from aggressive moves due to several factors that are tempering their risk appetite. These factors not only impacted the price of Bitcoin, but also overshadowed the prices of the entire cryptocurrency market.
Bitcoin’s recent performance has been significantly influenced by uncertainty over the Federal Reserve’s interest rate policies. Traders are wary of potential interest rate hikes amid ongoing inflation concerns. The Fed’s upcoming decisions, especially influenced by economic indicators like the PCE price index, are crucial to market sentiment.
“Bitcoin has been struggling to hold crucial support levels lately due to some bearish conditions in play. With a sharp drop in high-ticket transactions and ETF outflows once again exceeding inflows, market sentiment has declined. More importantly, the strengthening of the dollar index in the context of the US PMI reaching an optimistic value of 54.6 caused investors to lean towards the dollar and away from riskier assets. There has also been an influx of profit-taking, especially from derivatives trading, further eroding investor confidence,” said Rajagopal Menon, vice-president, WazirX.
Another important factor contributing to the Bitcoin slowdown is ETF outflows. A notable $545 million withdrawal from US Spot Bitcoin ETFs signals a shift in investor sentiment towards digital assets. Institutional investors, wary of market volatility and regulatory uncertainty, are reallocating their positions into Bitcoin-related investment products.
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