Gushiken Yona
Bitcoin, Ethereum and the broader crypto market see significant declines, driven by outflows from spot ETFs and growing expectations of aggressive Federal Reserve rate cuts.
The crypto market faced a sharp downturn, with Bitcoin and Ethereum posting significant weekly losses, as a wave of macroeconomic uncertainty prompts investors to pull back from digital assets. The shift reflected a broader “risk-off” sentiment, fueled by concerns over global economic growth and expectations of more aggressive monetary easing by central banks.
Bitcoin and Ethereum Lead the Crypto Market Slide
Bitcoin (BTC), the world’s largest crypto asset by market capitalization, closed the week at approximately $89,735. This marked a 14.4% decline from the previous week’s close of around ninety-four thousand two hundred seventy dollars.
Ethereum (ETH), the world’s second largest crypto asset by market capitalization, fared even worse. It plummeted 19.8% to end the week at approximately $2,020, according to Matteo Greco, Research Analyst at Fineqia International.
ETF Outflows Signal Crypto Investor Caution
The decline in prices coincided with substantial outflows from Bitcoin spot Exchange-Traded Funds (ETFs). “BTC spot ETFs recorded outflows of approximately $800 million last week, marking the fourth consecutive week of negative flows,” Greco said in a note seen by The Shib Daily. This trend, he explained, “reflects heightened uncertainty and risk-off sentiment among investors, driven by macroeconomic and geopolitical concerns.”
Ethereum spot ETFs also experienced outflows, with around $120 million exiting over the past week. This underscored a broader trend of investors reducing their exposure to digital assets.
Fed Rate Cut Expectations and Crypto Market Volatility
The market’s downturn is intertwined with shifting expectations regarding Federal Reserve monetary policy. “Market participants now anticipate the Federal Reserve (FED) will cut interest rates by 75 to 100 basis points in 2025, following the latest inflation and labor market data,” Greco stated.
While the labor market remains relatively strong and inflation appears contained, early signs of a slowdown are emerging. As a result, expectations have shifted towards a more aggressive monetary easing policy compared to recent forecasts.
This potential shift is significant because lower interest rates generally make riskier assets, like cryptocurrencies, more attractive. However, the reason for the expected rate cuts – a slowing economy – is creating a countervailing force of fear and uncertainty. The market appears to be prioritizing the immediate economic concerns over the potential long-term benefits of lower rates.
ECB Actions and MiCA Impact on the Crypto Market Slide
The European Central Bank (ECB) has already been actively cutting rates in response to sluggish economic growth. Last week, the ECB implemented its sixth consecutive rate cut, bringing interest rates down to two point five percent. “Given recent US economic data, the FED may accelerate its own rate-cutting cycle to align more closely with the ECB’s approach,” Greco observed.
Beyond monetary policy, regulatory changes are also impacting the European crypto market. The full implementation of the Markets in Crypto-Assets (MiCA) regulation is set to take effect at the start of the second quarter.
“As a result, most exchanges operating legally in Europe will delist all non-MiCA-compliant stablecoins by the end of the month,” Greco explained. “This includes major stablecoins such as USDT, DAI, and PAXG.” This regulatory shift is expected to increase the dominance of USDC in the European market, as Circle, its issuer, secured the necessary licensing several months ago.
Read More
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- Bitcoin ETF Outflows Spark Uncertainty, But Long-Term Bullishness Remains
- Binance to Delist USDT Trading Pairs in EEA, Keeps Deposits/Withdrawals Open
Yona has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Daily is an official media and publication of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
