The price of Bitcoin took a sharp dive on Tuesday afternoon, plunging to nearly $60,000 per coin and triggering a wave of liquidations for traders betting on the asset's price to rise. According to data from CoinGlass, over $261 million in long positions for all cryptocurrencies have been liquidated in the past 24 hours, with total liquidations, including short positions, exceeding $324 million.
The sudden drop in Bitcoin's price, which currently sits at $60,309 according to CoinGecko, comes amid a confluence of factors, including weak macro conditions and the unimpressive launch of a spot BTC exchange-traded fund (ETF) in Hong Kong. Despite expectations of $140 million in demand, the total trading volume for the Hong Kong ETFs, including Ether, was just $12.4 million on the opening day.
The lackluster performance of the Hong Kong spot ETF, coupled with diminished investor confidence in the U.S. Federal Reserve's ability to reduce interest rates twice in 2024, has contributed to the bearish sentiment in the cryptocurrency market. Fed Chair Jerome Powell's upcoming post-meeting remarks on May 1 have also prompted traders to exercise increased caution.
In addition to the disappointing Hong Kong ETF launch, U.S.-listed spot Bitcoin ETFs have seen four consecutive sessions of net outflows, raising concerns among traders. Investors have been withdrawing funds from the Grayscale GBTC ETF due to its high fees, while the Blackrock IBIT ETF has seen little activity, suggesting that the appetite for such investments in the U.S. is waning.
The recent drop in Bitcoin's price to $60,172 on April 30 can also be attributed to fears of an economic slowdown, as evidenced by modest earnings growth reported by McDonald's and a 2% drop in sales for automaker Volkswagen in the first quarter of 2024.
As a result of the volatility in traditional markets and the decreased interest from institutional investors in Bitcoin ETFs, the premium on Bitcoin futures dropped to its lowest level in five months. According to Laevitas.ch, the annualized premium for BTC futures fell to 7.5% on April 30, a drop from 11% just a week earlier. However, this indicator remained at a neutral level, which is a relatively positive sign considering Bitcoin's 9.5% price decline over the previous week.
The Bitcoin options market, on the other hand, paints a slightly different picture. The Bitcoin options delta skew shifted from a bullish -7% on April 28 to a neutral 1% currently, suggesting a balanced demand for call (buy) and put (sell) options. This shift indicates that investors were initially optimistic about the Hong Kong spot ETF launch but quickly adjusted their expectations after seeing the disappointing trading volumes.
Despite the recent setbacks, some analysts, including Bloomberg's Eric Balchunas, suggest that poor timing might have contributed to the low trading volumes of the Hong Kong ETF. The S&P 500 is set to record its first negative monthly performance in six months this April, and yields on U.S. 5-year Treasury notes have increased, reflecting higher return demands from investors.
