Bankless: Where will the opportunity be after Bitcoin's plunge?

Written by: Jack Inabinet

Compiled by: Kate, Mars Finance

Is there hope for a turnaround as prices continue to decline?

The drop in Bitcoin is erasing weeks of gains. Meanwhile, the total market capitalization of the crypto market is facing its largest decline since the approval of the spot BTC ETF was proven to be a sell-off news event. Will the bulls come to save the market, or is there more downside potential?

The outflow from the Grayscale Bitcoin Trust (GBTC) is accelerating. Yesterday, it reached $642.5 million, surpassing the record of $640.5 million set on January 22, leading to a total net outflow of $15.44 billion from all Bitcoin spot ETFs.

Following yesterday's performance, GBTC is now experiencing the largest outflow of any ETF since the stock market hit a low after the global financial crisis in March 2009. Currently, Grayscale hopes to reverse this poor performance record by committing to gradually reduce its excessively high fees.

The selling pressure from these fund flows is reflected in yesterday's cryptocurrency prices, with Bitcoin experiencing a nearly 9% drop from peak to trough after the U.S. stock market opened on Monday.

As prices fall, liquidations follow.

In the past 24 hours, a total of $635 million in leveraged trades were forcibly liquidated, with 80% coming from long positions, which has normalized the funding rates and provided a supportive environment for traders looking to establish new long positions.

Despite the decline in Bitcoin prices, a $14 trillion national pension fund in Japan (the largest pension fund in the world) announced that it is seeking information on Bitcoin to diversify its portfolio, bringing new hope for institutional adoption of cryptocurrencies.

The market is showing a strong risk appetite, indicating that we are in a bull market. However, it should be noted that a standard 30% bull market correction would bring BTC down to $51,000, providing room for further downside.

Tomorrow's Federal Reserve interest rate decision could be a major catalyst for market volatility, as the recently hot inflation data may prompt the Federal Open Market Committee (FOMC) to adopt a more hawkish policy stance than in recent months. This shift would delay market participants' expectations for rate cuts and dampen the ongoing risk rally that has persisted since last October.

The likelihood of a rate cut this month has plummeted to just 1%, a significant drop compared to the 90% chance of a rate cut in March that the market expected at the end of last year.