- 24-hour crypto liquidations exceeded the $1 billion mark on Tuesday amid the long streak of Bitcoin ETF redemptions and seemingly hawkish Fed stance.
The cryptocurrency market continued to bottom in the last 24 hours. At around 3:00 PM (UTC) on Tuesday, Coinglass data showed that crypto liquidations have already reached $1.02 billion within the period, with longs accounting for $908.91 million of the leveraged losses.
Bitcoin (BTC) led the bloodshed, wiping out $617.67 million trades in the process. Longs contributed $594.40 million to the wreckage.
Analysts blamed the prolonged streak of net outflows from spot Bitcoin exchange-traded funds (ETFs) and the US Federal Reserve’s seemingly hawkish stance for the extremely cautious crypto market sentiment lately.
Bitcoin ETF Outflows
Bitcoin ETF flows have been negative since mid-May, resulting in more than $2.96 billion net outflows from that point until the end of the month. BlackRock’s iShares Bitcoin Trust ETF (IBIT) alone had $2.11 billion in net redemptions within the same timeframe.
On Monday, the withdrawals resumed, with $483.8 million in net outflows. IBIT shed $440.3 million during the same trading day.
One of the key events that shook the market at the start of June was Strategy’s (MSTR) disclosure, revealing that it sold 32 BTC for around $2 million. The outflow was but a minuscule fraction of the company’s holdings of the premier crypto asset, which still amounts to 843,706 BTC after the sale.
However, the event catalyzed negative feedback from the majority of crypto market participants. Regardless of the amount of the sale, many considered the move a symbol of betrayal from the company and Michael Saylor, Executive Chair of Strategy, who has repeatedly stated in the past that the institution will never sell even a portion of its BTC haul past its first-ever and only sale in December 2022.
Many argued that Strategy’s action signifies cracks in its commitment, which could eventually lead to gradual offloading due to unrealized losses on its Bitcoin position. Blockzeit’s Strategy Tracker indicates that the company’s average BTC purchase is $77,135, nearly $10K above the coin’s 24-hour low.
Hawkish Fed
According to Forbes, institutional players are now ruling out any possible interest rate cuts in the US. It follows the recent rise in headline inflation to 3.8%, the highest in America in three years.
Michelle Bowman, Governor at the Fed, warned about the possible repercussions if the central bank turned the dial toward an interest rate hike amid the surging inflation. The official explained that not all inflation is the same, and higher interest rates are not a one-size-fits-all solution to such a scenario.
Nonetheless, the consensus is already pricing the market toward a hawkish Fed amid expectations of an interest rate increase if macro conditions worsen.
Crypto generally behaves as a high-beta risk asset. Hence, any inkling of an interest rate hike typically causes investors to rotate their capital from crypto to safer, yield-bearing instruments, such as US Treasuries.
