Bitcoin Volatility, Market Turbulence Peek Amid Regulatory Uncertainty Ahead Of Ethereum ETF Decision

May 7, 2024

The cryptocurrency market witnessed a surge in volatility and market turbulence as regulatory uncertainty reached its peak, fueled by anticipation surrounding the imminent decision on Ethereum ETFs.

Bitcoin’s rollercoaster week, marked by significant price fluctuations, added to the atmosphere of uncertainty, highlighting the interconnectedness of regulatory factors and market dynamics in shaping investor sentiment and asset valuations.

Bitcoin’s price surged to an impressive peak above $65,500 this week, only to face a swift correction that shaved off over $2,000 from its value. The cryptocurrency’s tumultuous week was characterized by extreme volatility, leading to a sharp plunge to a two-month low of $56,500 last Wednesday. 

Market dynamics intensified further after the U.S. Federal Reserve announced its decision to hold interest rates steady, triggering another round of fluctuations before making a strong recovery toward the end of the week, surpassing the $60,000 mark on Friday and eventually closing at around $64,000. 

This turnaround effectively reversed the negative price trend observed earlier in the week, showcasing the resilience and potential for rapid rebound within the cryptocurrency market. The king of crypto surpassed the $60,000 threshold which continued over the weekend at $64,500.

The world’s oldest crypto asset, however, experienced a brief retracement Sunday but reached a 12-day peak of $65,500 Monday. But, what could be the reason behind Bitcoin’s inability to surge past the $65,000 threshold?

Matteo Greco, research analyst at the publicly listed digital asset and fintech investment business Fineqia International, attributed this to the continued net outflows from BTC ETFs, which indicate a short-term negative trend in the market. He explained the specific dynamics of these flows and their potential impact on Bitcoin’s price.

Greco also highlighted the trading volume patterns that may suggest a stabilization in the market.

“Trading volume for BTC ETFs remained relatively steady during the week, with cumulative trading volume since inception reaching $246.6 billion, recording $10.9 billion during the week alone,” he explained in a note seen by The Shib Daily. “This marks a 12.3% increase from the $9.7 billion recorded the previous week but remains below the average trading volume of $3.1 billion since inception. These figures suggest that the period of outflows may have peaked, with trading volumes showing signs of increase and outflows potentially stabilizing.”

Aside from those, Greco underlined that the Securities and Exchange Commission (SEC) is set to decide on Ethereum (ETH) Spot ETFs this month, with deadlines for VanEck and Ark 21Shares filings looming. Market expectations are mixed, anticipating potential rejections due to concerns over ETH’s market liquidity and its past security classification. 

“If rejected, issuers may restart the approval process, delaying potential approval until late 2024 or early 2025,” the research analyst highlighted, before adding, “Inflation remaining high provides leeway for the Fed to maintain a tighter monetary policy, with interest rate cuts likely in Q4 2024 if inflation remains stable.”

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