The cryptocurrency market experienced a broad sell-off on Thursday. Bitcoin fell below the $75,000 mark, and Ethereum dropped under $2,000, with other major tokens like XRP also declining, pressured by a combination of hawkish signals from the Federal Reserve, geopolitical tensions, and persistent outflows from ETFs. As a barometer for market risk appetite, the crypto sector has been under sustained pressure recently.
This downturn was triggered by the convergence of three negative factors.
First, hawkish macroeconomic expectations are suppressing risk appetite. The latest data shows that the U.S. PCE price index rose 3.8% year-over-year in April, with the core PCE at 3.3%, both significantly above the Federal Reserve's 2% target. St. Louis Fed President Musalem explicitly stated that relying on expectations of AI-driven productivity gains to solve inflation is "dangerous." Market expectations for a rate cut this year have largely dissipated, with the probability of a rate hike instead rising to 60%. The high-interest-rate environment significantly diminishes the appeal of non-yielding assets like Bitcoin.
Second, geopolitical conflicts have triggered a flight to safety. Ongoing military actions by the U.S. and Israel against Iran continue to impact the market. It is reported that the U.S. military recently launched a new round of airstrikes on Iranian military facilities near the Strait of Hormuz, leading to nearly $900 million in forced liquidations of cryptocurrency positions within 24 hours, with long positions accounting for over 93% of the total. Although the White House denied reports of a 60-day ceasefire memorandum of understanding between the U.S. and Iran, the two sides are still negotiating—former President Trump expressed dissatisfaction with the current agreement framework.
Third, ETF funds continue to flee. U.S.-listed spot Bitcoin ETFs have faced large-scale redemptions. Data shows that BlackRock's IBIT alone recorded an outflow of $528 million on May 27, marking the second-largest single-day withdrawal in the product's history. Total ETF outflows over the past week reached $1.07 billion, ending a six-week streak of inflows.
During Thursday's trading session in the U.S., Bitcoin was trading around $73,000, representing a pullback of over 11% from its high of around $82,000 earlier this month and a 42% decline from its all-time high of $126,000 set in October last year. Ethereum performed even more weakly, breaking below the psychological $2,000 level to $1,984, with a roughly 3% drop over 24 hours. XRP was among the hardest hit in today's market. Affected by news of Ripple transferring 60 million XRP during the decline, XRP fell below the key support level of $1.30, touching a low of $1.27, its lowest level since February. The CoinDesk 20 index fell 3.1% to 1,961.44 points.
Several analysts remain cautious about the outlook. Michael Kramer of Mott Capital Management warned that after breaking below the support near $75,000, Bitcoin could "move significantly lower." The next key level to watch is the $70,000 mark; if that fails to hold, it could open the door for a decline towards the $65,000 region.
Another major concern for the current market is dwindling liquidity. Glassnode data indicates that spot trading volumes for Bitcoin and altcoins have fallen to their lowest levels since November 2023. In a low-liquidity environment, even moderate selling pressure can trigger significant declines. Furthermore, upcoming U.S. Treasury operations are expected to drain approximately $150 billion in liquidity from the financial system over the next week, which will exert further pressure on all risk assets.
A Hong Kong-based cryptocurrency trader told media, "Market sentiment is very fragile right now. Everyone is waiting for a clear turning signal from the macro side, whether it's a dovish pivot from the Fed or a de-escalation in the Middle East. Until then, any rally is likely to be seen as an opportunity to reduce positions."
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