Bitcoin
Why Did BTC Price Drop $3K on Friday Despite Impressive Bitcoin ETF Inflows?
After days and days of posting gains and testing the $72,000 price, bitcoin reversed its trajectory on Friday and dropped more than three thousand in hours.
The question arises as to why this happened, as flows into US-based ETFs continue to arrive.
The impact of the Bitcoin ETF
It’s safe to say that the biggest and most vital news in the cryptocurrency industry this year has been the ETFs that the US Securities and Exchange Commission greenlit in January. Not the halving, which usually everyone talks about every four years, but specifically Bitcoin ETFs (the impact of Ethereum ETFs will be known after their launch).
After all, numerous financial giants, including Black stone and Fidelity, became issuers of an exchange-traded fund with an underlying asset, a cryptocurrency – a phrase that wouldn’t have made much sense five years ago. Now, however, retail investors as well as institutions can easily be exposed to bitcoin’s performance without having to worry about storing some mystical keys and remembering complicated passwords.
The effects were immediate, as the price of BTC soared more than 50% within weeks and reached a new all-time high of $73,800 about two months after the launch of ETFs in the United States. This was the first time the asset recorded a new record before the halving.
Subsequent price movements were also strongly impacted by the inflows or outflows of these financial vehicles. For example, BTC fell sharply in mid-April and early May as investors withdrew substantial amounts almost daily. Price movements changed when its behavior changed in mid-May and so far in June.
In fact, ETFs are at their best since they saw the light of day. The last time they felt outflows was a month ago – on May 10th. Appetizer for 19 days in a row. However, BTC thrown away hard on Friday, falling down from $72,000 to $68,500 in minutes.
Why is that?
Well, if we can’t blame ETF flows, the community has reached a consensus on the main reason. Popular analyst Willy Woo said, “Bitcoin won’t get good things until last-minute degen logs give up chasing the price,” suggesting there is a lot of leverage in the system. This theory was echoed several times on Crypto X in the last day or so.
Another theory that is quite popular among the community involves profit taking. Coming within just 2% of its all-time high of $73,800 meant almost all investors’ funds made a profit, which many consider a good exit point to withdraw some cash.
No matter the reason, the fact is that BTC’s drop caused more than $400 million in liquidations in one day. This should be a warning to overleveraged traders to be cautious of such potential swings in either direction.