Takeaways from the conference:
- Bitcoin’s sharp drop of 8% triggered forced liquidations worth $1.5 billion, ending the tight correlation between small caps and bitcoins that lasted for two months.
- The market’s negative sentiment is mainly due to the $2.1 billion Bitcoin ETF withdrawals, and fears about a Federal Reserve rate increase.
Bitcoin (BTC), which had been gaining momentum, suffered a steep 9% decline over the past 48 hours. It hit the support level of $67,000 for the first two-month period. The correction has wiped $176 billion off the market cap of all cryptos in two days. This led to $1.5bn in liquidations due to overly leveraged long positions.
Crypto’s performance has been a mystery to traders, particularly since US stocks have performed well.
US Russell 2000 small-cap equities (left), compared to Bitcoin/USD. Source: TradingView
On May 21, the two-month-long tight correlation of Bitcoin with US small-cap stock officially ended. A $2.1 billion drop in capital outflows was likely to be the cause of the deteriorating market mood. US-listed spot Bitcoin ETFs Between May 12-20, derivatives data already hinted at an institutional lack of appetite.
Bitcoin futures 2-month basis rate. Source: Laevitas
Since over three months the annualized BTC Futures Premium relative to Spot Markets has been lower than neutral 4% threshold, which confirms weak demand for bullish lever.
AI investment gains and Bitcoin’s accumulation stoppage.
Michael Saylor is the leader of Strategy (MSTR US). It has also received mixed reviews after its decision to choose. buy back convertible debt While pausing the weekly Bitcoin transactions.
Source: X/bjunjo
X user ‘bjunjo’ said that Strategy entered “survival mode for their debt holders and shareholders,” In other words, if you are only interested in accumulating more Bitcoins then that is all your mission. As shown in the analysis, the firm will do what it takes to satisfy its financial obligations. recent BTC 32 sale. Jeff Dorman, Chief Investment Officer at Arca, called Move! “a complete balance sheet mismanagement.”
Source: X/ScroogeCap
ScroogeCap, an analyst at X, noted that Google (GOOG US), by choosing to raise equity instead of debt indicates that private equity has effectively died as liquidity dries. Oracle’s (ORCL US), debt-to equity ratio is unusually high. Meta (META US), on the other hand, may be forced to raise more capital because of its low liquidity. “irrational spending.”
Jim Bianco from Bianco Research is reported to be the owner of Bianco Research said, “We have not seen the market this concentrated around a single theme in 150 years.” Additionally, JPMorgan research found that 41 AI-related stocks account for half of the S&P 500’s market value.
Related: Bitcoin gets new $50K target after BTC price crashes 6% in a day
Rate target probability for FOMC September Meeting. Source: CME Group
As the conflict in Iran continued to rage, traders became more cautious. This is what led to a selloff on all cryptocurrency markets. According to CME FedWatch Tool, US government bonds now price in a probability of 23% that the US Federal Reserve will raise interest rates before September. This is up from just 0% one month ago.
Final analysis: The crash in the crypto market on Tuesday is largely due to the heavy withdrawals of capital from Bitcoin spot ETFs. This was coupled with an extremely concentrated investment portfolio in AI and a macroeconomic climate that signals a stricter monetary environment for a longer period than anticipated by the market.
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
“ItsDailyCrypto is not responsible for any activities you perform outside ItsDailyCrypto.”
Source: cointelegraph.com
