Bitcoin Experiences 5.3% Drop Following Record ETF Outflow of $680 Million
Bitcoin (BTC) is experiencing its first seven-day decline in eight weeks due to hawkish signals from the US Federal Reserve, prompting traders to sell off the asset, which has more than doubled in value this year.
Bitcoin Rebounds To $97,500 After Historic ETF Outflow
The leading cryptocurrency dropped as much as 5.3% to $92,149 on Friday, following a record high of just above $108,000 earlier in the week. Bitcoin has since recovered to approximately $97,500, reflecting a 5% decrease since Sunday.
This downturn has also impacted smaller cryptocurrencies, including Ethereum (ETH) and Dogecoin (DOGE), despite generally positive performance in US equities.
A significant outflow from US exchange-traded funds (ETFs) investing directly in Bitcoin was recorded on Thursday, totaling $680 million, ending a 15-day streak of inflows, according to Bloomberg data.
The heightened volatility in the crypto market follows a rally that began after Donald Trump’s victory in the US presidential election on November 5.
Analysts from QCP Capital noted that market positioning had become "overly bullish," making digital assets vulnerable to fluctuations in the Federal Reserve's stance on inflation control.
With the US Federal Reserve signaling a potential slowdown in easing measures following Chair Powell's announcement on Wednesday, attention is shifting to the pace at which traditional financial institutions adopt cryptocurrency.
Historical Patterns Suggest Potential Rebound For BTC’s Price
Hani Abuagla, a senior market analyst at XTB, stated that monetary policy, institutional adoption, and political developments suggest Bitcoin will remain sensitive to macroeconomic and crypto-specific catalysts through 2025.
This sentiment is echoed by Chris Weston, head of research at Pepperstone Group, who advised caution in the short term. Weston indicated that while a collapse in price is not imminent, momentum behind Bitcoin's recent rally has diminished, indicating a shift in market control.
Market expert Lark Davis reassured investors that historical patterns could indicate a rebound in the coming days. He referenced December 2020, when Bitcoin experienced a 12% drop after a 77% rally but then surged from $17,000 to $41,000—a 136% increase—in just 23 days.
Davis suggests a similar scenario may be unfolding now, with Bitcoin facing a 13% dip after a strong fourth quarter. While he acknowledges the possibility of an additional 10-15% correction, he remains optimistic about further upward movement in the cryptocurrency market.
Featured image from DALL-E, chart from TradingView.com