The cryptocurrency market experienced a significant decline on March 19, resulting in a 7.68% drop in total market capitalization to $2.27 trillion.
Bitcoin (BTC), the leading cryptocurrency, led the losses with a decrease of approximately 7% to reach around $62,650. Ethereum’s native token, Ether (ETH), the second-largest cryptocurrency, also suffered a decline of around 8% to $3,200.
Other top cryptocurrencies also performed poorly during this period.
The decline in market capitalization coincided with the largest single-day outflow ever recorded from Bitcoin exchange-traded funds (ETFs). Grayscale Bitcoin ETF experienced outflows worth $642.5 million on March 18, while Fidelity’s Bitcoin ETF saw its lowest inflow day on record at $5.9 million. This resulted in a net outflow of $154.3 million from spot Bitcoin ETFs.
The slowdown in capital inflows towards Bitcoin ETFs comes ahead of the Federal Open Market Committee meeting on March 20. The future of Bitcoin’s bull run and the crypto market as a whole depends on the Federal Reserve’s monetary policy. If inflation dips below 3% or signs of an economic downturn emerge, a shift from tight to loose monetary policy could occur, potentially impacting the crypto market rally.
The decline in the crypto market can also be attributed to a broader correction that began on March 14, when the market reached a local peak of $2.72 trillion. Bearish divergence signals and overvaluation indicated a weakening price growth and reduced trader demand. The Net Unrealized Profit and Loss (NUPL) also signaled a prime opportunity for profit-taking, leading to a noticeable correction in March.
Furthermore, the sharp drop in cryptocurrency prices triggered a wave of liquidations in the derivatives market, particularly affecting long positions. Over $182 million in positions were liquidated in the past day, with long positions accounting for $140 million of the total. These liquidations can exert downward pressure on asset prices, especially when trading volumes lack sufficient buying momentum.
It’s important to note that this article does not provide investment advice. Readers should conduct their own research and exercise caution when making investment decisions.
What is the reason behind today's decline in the cryptocurrency market?