March 20, 2024 11:35 AM | 2 minute read |
Just a few days ago Bitcoin (CRYPTO:BTC) was basking in the glory of hitting an all-time high above $73,000.
However, the winds of change are blowing through the crypto market, sending Bitcoin down about 13% to around $64,000.
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What caused this sudden drop and what does it mean for the future of Bitcoin?
The dangers of excessive leverage
At the forefront of Bitcoin's recent price correction is the issue of overleverage in the market.
Market movements since March 14, when Bitcoin hit a new all-time high of $73,737.94, have triggered liquidations across centralized exchanges, impacting both long and short positions. According to data from CoinGlass, this market turmoil led to the liquidation of more than $3.04 billion in positions.
Impact of Ethereum
Another important factor in Bitcoin price fluctuations is Ethereum (CRYPTO: ETH), the second largest cryptocurrency by market capitalization.
Speculation surrounding the approval of an Ethereum ETF is driving the market.
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However, as sentiment shifted to the view that ETF approval may be on the horizon, Ethereum's price took a hit and Bitcoin also fell.
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Bitcoin ETF inflows turn into outflows
The introduction of Bitcoin ETFs has been hailed as a milestone in crypto adoption, potentially paving the way for institutional and retail investors.
However, recent data showing negative inflows into Bitcoin ETFs is contributing to the bearish mood. This trend suggests a cautious approach with investors potentially awaiting clearer regulatory signals and more stable market conditions.
Solana Meme Coin Phenomenon
Finally, there is the meteoric rise of meme coins. Solana (CRYPTO: SOL) Blockchain, often referred to as “shitcoin” by critics due to its speculative nature, also plays a role in Bitcoin's price movement.
The frenzy surrounding meme coins is indicative of widespread enthusiasm for high-risk, high-return investments in the cryptocurrency space.
As the market corrected, excessive speculation around these assets contributed to widespread instability in the market, impacting established cryptocurrencies such as Bitcoin.
Read next: Bitcoin to $1 million? 'Insane macro' will make it happen, Arthur Hayes: 'It's time to add more'
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