Crypto Sell-off : Why is Bitcoin Going Down?

The post Crypto Sell-off : Why is Bitcoin Going Down? appeared first on Coinpedia Fintech News

There is blood all over Satoshi Street, with little hope of recovery in the coming days the market is sinking to its lowest levels with Bitcoin trading at a critical level of $89K. 

With the constant pull in Bitcoin prices after January’s $108K show, major investors pull their money out of U.S. spot Bitcoin ETFs. On Feb. 24, U.S. spot Bitcoin ETFs saw $517 million in outflows—the biggest in seven weeks as per data. This marks the fifth straight day of withdrawals, with BlackRock’s iShares Bitcoin Trust (IBIT) losing $159 million and Fidelity’s Wise Origin Bitcoin Fund seeing $247 million in outflows. Other funds like Bitwise, Invesco, and Grayscale saw big withdrawals, pushing Bitcoin down over 5% to $91K, then further to $89,175, dropping 2.25% in the last hour.

Hold or Sell? 

Blaming Trump’s tariff policy changes, BitMEX co-founder Arthur Hayes warns that Bitcoin could drop to $70,000 as hedge funds unwind their positions. Many of these funds invested in Bitcoin ETFs while betting against Bitcoin futures on the Chicago Mercantile Exchange (CME). This strategy called a “basis trade,” helped them earn profits with minimal risk by taking advantage of the price gap between spot Bitcoin ETFs and futures contracts.

However, as Bitcoin’s price drops, hedge funds see reduced profits and are exiting by selling ETF shares and buying back CME futures. Hayes expects this to continue during U.S. trading hours, adding more pressure to Bitcoin. Hayes believes this will continue during U.S. trading hours, adding more pressure to Bitcoin’s price.

Bitcoin Could Drop to $70,000

Hayes predicts that this selling could send Bitcoin down to $70,000. When hedge funds exit in large numbers, it creates a chain reaction—more selling leads to lower prices, which forces other funds to do the same, making the decline even worse.

According to Markus Thielen from 10x Research, much of the demand for Bitcoin ETFs came from hedge funds playing this arbitrage trade rather than long-term investors. Now that these funds are pulling out, Bitcoin’s price is reacting to the sudden lack of demand. If the futures premium drops further, more funds could be forced to sell their ETF shares and buy back their shorted futures, driving Bitcoin even lower.

Bitcoin at a Turning Point

Bitcoin surged past $100,000 after Trump’s election victory fueled hopes of a Bitcoin strategic reserve. But with ETF investors leaving and hedge funds exiting their trades, Bitcoin is struggling to stay strong. If new buyers don’t step in, Hayes’ warning of Bitcoin dropping to $70,000 could become a reality. The market is rooting for new ETFs at this moment to bring fresh capital into the system to the recover from downmarket. While the SEC is showing its interest in ETFs chances are that the next ETF batch is ready to hit the market.